[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1531 Reported in House (RH)]
Union Calendar No. 41
108th CONGRESS
1st Session
H. R. 1531
[Report No. 108-67]
To amend the Internal Revenue Code of 1986 to enhance energy
conservation and to provide for reliability and diversity in the energy
supply for the American people, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 1, 2003
Mr. McCrery introduced the following bill; which was referred to the
Committee on Ways and Means
April 9, 2003
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed
in italic]
[For text of introduced bill, see copy of bill as introduced on April
1, 2003]
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to enhance energy
conservation and to provide for reliability and diversity in the energy
supply for the American people, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
(a) Short Title.--This Act may be cited as the ``Energy Tax Policy
Act of 2003''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
(c) Table of Contents.--
Sec. 1. Short title.
TITLE I--CONSERVATION
Sec. 101. Credit for residential solar energy property.
Sec. 102. Extension and expansion of credit for electricity produced
from renewable resources.
Sec. 103. Credit for qualified fuel cell power plants.
Sec. 104. Credit for energy efficiency improvements to existing homes.
Sec. 105. Business credit for construction of new energy efficient
home.
Sec. 106. Energy credit for combined heat and power system property.
Sec. 107. New nonrefundable personal credits allowed against regular
and minimum taxes.
Sec. 108. Repeal of 4.3-cent motor fuel excise taxes on railroads and
inland waterway transportation which remain
in general fund.
Sec. 109. Reduced motor fuel excise tax on certain mixtures of diesel
fuel.
Sec. 110. Repeal of phaseouts for qualified electric vehicle credit and
deduction for clean fuel-vehicles.
Sec. 111. Alternative motor vehicle credit.
TITLE II--RELIABILITY
Sec. 201. Natural gas gathering lines treated as 7-year property.
Sec. 202. Natural gas distribution lines treated as 15-year property.
Sec. 203. Electric transmission property treated as 15-year property.
Sec. 204. Expensing of capital costs incurred in complying with
Environmental Protection Agency sulfur
regulations.
Sec. 205. Credit for production of low sulfur diesel fuel.
Sec. 206. Determination of small refiner exception to oil depletion
deduction.
Sec. 207. Sales or dispositions to implement Federal Energy Regulatory
Commission or State electric restructuring
policy.
Sec. 208. Modifications to special rules for nuclear decommissioning
costs.
Sec. 209. Treatment of certain income of cooperatives.
Sec. 210. Arbitrage rules not to apply to prepayments for natural gas.
Sec. 211. Prepayment of premium liability for coal industry health
benefits.
TITLE III--PRODUCTION
Sec. 301. Oil and gas from marginal wells.
Sec. 302. Temporary suspension of limitation based on 65 percent of
taxable income and extension of suspension
of taxable income limit with respect to
marginal production.
Sec. 303. Amortization of delay rental payments.
Sec. 304. Amortization of geological and geophysical expenditures.
Sec. 305. Extension and modification of credit for producing fuel from
a nonconventional source.
Sec. 306. Business related energy credits allowed against regular and
minimum tax.
Sec. 307. Temporary repeal of alternative minimum tax preference for
intangible drilling costs.
Sec. 308. Allowance of enhanced recovery credit against the alternative
minimum tax.
TITLE IV--CORPORATE EXPATRIATION
Sec. 401. Tax treatment of corporate expatriation.
Sec. 402. Expressing the sense of the Congress that tax reform is
needed to address the issue of corporate
expatriation.
TITLE I--CONSERVATION
SEC. 101. CREDIT FOR RESIDENTIAL SOLAR ENERGY PROPERTY.
(a) In General.--Subpart A of part IV of subchapter A of chapter 1
(relating to nonrefundable personal credits) is amended by inserting
after section 25B the following new section:
``SEC. 25C. RESIDENTIAL SOLAR ENERGY PROPERTY.
``(a) Allowance of Credit.--In the case of an individual, there
shall be allowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to the sum of--
``(1) 15 percent of the qualified photovoltaic property
expenditures made by the taxpayer during such year, and
``(2) 15 percent of the qualified solar water heating
property expenditures made by the taxpayer during the taxable
year.
``(b) Limitations.--
``(1) Maximum credit.--The credit allowed under subsection
(a) shall not exceed--
``(A) $2,000 for each system of property described
in subsection (c)(1), and
``(B) $2,000 for each system of property described
in subsection (c)(2).
``(2) Safety certifications.--No credit shall be allowed
under this section for an item of property unless--
``(A) in the case of solar water heating equipment,
such equipment is certified for performance and safety
by the non-profit Solar Rating Certification
Corporation or a comparable entity endorsed by the
government of the State in which such property is
installed, and
``(B) in the case of a photovoltaic system, such
system meets appropriate fire and electric code
requirements.
``(c) Definitions.--For purposes of this section--
``(1) Qualified solar water heating property expenditure.--
The term `qualified solar water heating property expenditure'
means an expenditure for property to heat water for use in a
dwelling unit located in the United States and used as a
residence if at least half of the energy used by such property
for such purpose is derived from the sun.
``(2) Qualified photovoltaic property expenditure.--The
term `qualified photovoltaic property expenditure' means an
expenditure for property which uses solar energy to generate
electricity for use in a dwelling unit.
``(3) Solar panels.--No expenditure relating to a solar
panel or other property installed as a roof (or portion
thereof) shall fail to be treated as property described in
paragraph (1) or (2) solely because it constitutes a structural
component of the structure on which it is installed.
``(4) Labor costs.--Expenditures for labor costs properly
allocable to the onsite preparation, assembly, or original
installation of the property described in paragraph (1) or (2)
and for piping or wiring to interconnect such property to the
dwelling unit shall be taken into account for purposes of this
section.
``(5) Swimming pools, etc., used as storage medium.--
Expenditures which are properly allocable to a swimming pool,
hot tub, or any other energy storage medium which has a function other
than the function of such storage shall not be taken into account for
purposes of this section.
``(d) Special Rules.--
``(1) Dollar amounts in case of joint occupancy.--In the
case of any dwelling unit which is jointly occupied and used
during any calendar year as a residence by 2 or more
individuals the following shall apply:
``(A) The amount of the credit allowable under
subsection (a) by reason of expenditures made during
such calendar year by any of such individuals with
respect to such dwelling unit shall be determined by
treating all of such individuals as 1 taxpayer whose
taxable year is such calendar year.
``(B) There shall be allowable with respect to such
expenditures to each of such individuals, a credit
under subsection (a) for the taxable year in which such
calendar year ends in an amount which bears the same
ratio to the amount determined under subparagraph (A)
as the amount of such expenditures made by such
individual during such calendar year bears to the
aggregate of such expenditures made by all of such
individuals during such calendar year.
``(C) Subparagraphs (A) and (B) shall be applied
separately with respect to qualified solar water
heating property expenditures and qualified
photovoltaic property expenditures.
``(2) Tenant-stockholder in cooperative housing
corporation.--In the case of an individual who is a tenant-
stockholder (as defined in section 216) in a cooperative
housing corporation (as defined in such section), such
individual shall be treated as having made his tenant-
stockholder's proportionate share (as defined in section
216(b)(3)) of any expenditures of such corporation.
``(3) Condominiums.--
``(A) In general.--In the case of an individual who
is a member of a condominium management association
with respect to a condominium which he owns, such
individual shall be treated as having made his
proportionate share of any expenditures of such
association.
``(B) Condominium management association.--For
purposes of this paragraph, the term `condominium
management association' means an organization which
meets the requirements of paragraph (1) of section
528(c) (other than subparagraph (E) thereof) with
respect to a condominium project substantially all of
the units of which are used as residences.
``(4) Allocation in certain cases.--If less than 80 percent
of the use of an item is for nonbusiness purposes, only that
portion of the expenditures for such item which is properly
allocable to use for nonbusiness purposes shall be taken into
account.
``(5) When expenditure made; amount of expenditure.--
``(A) In general.--Except as provided in
subparagraph (B), an expenditure with respect to an
item shall be treated as made when the original
installation of the item is completed.
``(B) Expenditures part of building construction.--
In the case of an expenditure in connection with the
construction or reconstruction of a structure, such
expenditure shall be treated as made when the original
use of the constructed or reconstructed structure by
the taxpayer begins.
``(C) Amount.--The amount of any expenditure shall
be the cost thereof.
``(6) Property financed by subsidized energy financing.--
For purposes of determining the amount of expenditures made by
any individual with respect to any dwelling unit, there shall
not be taken into account expenditures which are made from
subsidized energy financing (as defined in section
48(a)(4)(A)).
``(e) Basis Adjustments.--For purposes of this subtitle, if a
credit is allowed under this section for any expenditure with respect
to any property, the increase in the basis of such property which would
(but for this subsection) result from such expenditure shall be reduced
by the amount of the credit so allowed.
``(f) Termination.--The credit allowed under this section shall not
apply to taxable years beginning after December 31, 2006 (December 31,
2008, with respect to qualified photovoltaic property expenditures).''.
(b) Conforming Amendments.--
(1) Subsection (a) of section 1016 is amended by striking
``and'' at the end of paragraph (27), by striking the period at
the end of paragraph (28) and inserting ``, and'', and by
adding at the end the following new paragraph:
``(29) to the extent provided in section 25C(e), in the
case of amounts with respect to which a credit has been allowed
under section 25C.''.
(2) The table of sections for subpart A of part IV of
subchapter A of chapter 1 is amended by inserting after the
item relating to section 25B the following new item:
``Sec. 25C. Residential solar energy
property.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years ending after December 31, 2003.
SEC. 102. EXTENSION AND EXPANSION OF CREDIT FOR ELECTRICITY PRODUCED
FROM RENEWABLE RESOURCES.
(a) Extension of Credit for Wind and Closed-Loop Biomass
Facilities.--Subparagraphs (A) and (B) of section 45(c)(3) are each
amended by striking ``2004'' and inserting ``2007''.
(b) Expansion of Credit for Open-Loop Biomass, Landfill Gas
Facilities, and Trash Combustion Facilities.--Paragraph (3) of section
45(c) is amended by adding at the end the following new subparagraphs:
``(D) Open-loop biomass facilities.--In the case of
a facility using open-loop biomass to produce
electricity, the term `qualified facility' means any
facility owned by the taxpayer which is originally
placed in service before January 1, 2007.
``(E) Landfill gas facilities.--In the case of a
facility producing electricity from gas derived from
the biodegradation of municipal solid waste, the term
`qualified facility' means any facility owned by the
taxpayer which is originally placed in service before
January 1, 2007.
``(F) Trash combustion facilities.--In the case of
a facility which burns municipal solid waste to produce
electricity, the term `qualified facility' means any
facility owned by the taxpayer which is originally
placed in service after the date of the enactment of
this subparagraph and before January 1, 2007.''.
(c) Definition and Special Rules.--Subsection (c) of section 45 is
amended by adding at the end the following new paragraphs:
``(5) Open-loop biomass.--The term `open-loop biomass'
means any solid, nonhazardous, cellulosic waste material which
is segregated from other waste materials and which is derived
from--
``(A) any of the following forest-related
resources: mill residues, precommercial thinnings,
slash, and brush,
``(B) solid wood waste materials, including waste
pallets, crates, dunnage, manufacturing and
construction wood wastes (other than pressure-treated,
chemically-treated, or painted wood wastes), and
landscape or right-of-way tree trimmings, but not
including municipal solid waste (garbage), gas derived
from the biodegradation of solid waste, or paper that
is commonly recycled, or
``(C) agriculture sources, including orchard tree
crops, vineyard, grain, legumes, sugar, and other crop
by-products or residues.
Such term shall not include closed-loop biomass.
``(6) Reduced credit for certain preeffective date
facilities.--In the case of any facility described in
subparagraph (D) or (E) of paragraph (3) which is placed in
service before the date of the enactment of this paragraph--
``(A) subsection (a)(1) shall be applied by
substituting `1.0 cents' for `1.5 cents', and
``(B) the 5-year period beginning on the date of
the enactment of this paragraph shall be substituted in
lieu of the 10-year period in subsection (a)(2)(A)(ii).
``(7) Credit eligibility for open-loop biomass
facilities.--In the case of any facility described in paragraph
(3)(D) which is placed in service before the date of enactment
of this paragraph, if the owner of such facility is not the
producer of the electricity, the person eligible for the credit
allowable under subsection (a) is the lessee or the operator of
such facility.
``(8) Limit on reductions for grants, etc., for open-loop
biomass facilities.--If the amount of the credit determined
under subsection (a) with respect to any open-loop biomass
facility is required to be reduced under paragraph (3) of
subsection (b), the fraction under such paragraph shall in no
event be greater than \1/2\.
``(9) Coordination with section 29.--The term `qualified
facility' shall not include any facility the production from
which is allowed as a credit under section 29 for the taxable
year or any prior taxable year.''.
(d) Qualified Energy Resources.--Paragraph (1) of section 45(c)
(relating to qualified energy resources) is amended to read as follows:
``(1) Qualified energy resources.--The term `qualified
energy resources' means any resource described in paragraph (3)
which is used to generate electricity at a qualified
facility.''.
(e) Effective Date.--The amendments made by this section shall
apply to electricity sold after the date of the enactment of this Act,
in taxable years ending after such date.
SEC. 103. CREDIT FOR QUALIFIED FUEL CELL POWER PLANTS.
(a) Business Property.--
(1) In general.--Subparagraph (A) of section 48(a)(3)
(defining energy property) is amended by striking ``or'' at the
end of clause (i), by adding ``or'' at the end of clause (ii),
and by inserting after clause (ii) the following new clause:
``(iii) equipment which is part of a
qualified fuel cell power plant,''.
(2) Qualified fuel cell power plant.--Subsection (a) of
section 48 is amended by redesignating paragraphs (4) and (5)
as paragraphs (5) and (6), respectively, and by inserting after
paragraph (3) the following new paragraph:
``(4) Qualified fuel cell power plant.--For purposes of
this subsection--
``(A) In general.--The term `qualified fuel cell
power plant' means a fuel cell power plant that has an
electricity-only generation efficiency greater than 30
percent.
``(B) Limitation.--The energy credit with respect
to any qualified fuel cell power plant for any taxable
year shall not exceed--
``(i) $500 for each \1/2\ kilowatt of
capacity of the power plant, reduced by
``(ii) the aggregate energy credits allowed
with respect to such power plant for all prior
taxable years.
``(C) Fuel cell power plant.--The term `fuel cell
power plant' means an integrated system comprised of a
fuel cell stack assembly and associated balance of
plant components that converts a fuel into electricity
using electrochemical means.
``(D) Termination.--Such term shall not include any
property placed in service after December 31, 2006.''.
(3) Effective date.--The amendments made by this subsection
shall apply to property placed in service after December 31,
2003, under rules similar to the rules of section 48(m) of the
Internal Revenue Code of 1986 (as in effect on the day before
the date of the enactment of the Revenue Reconciliation Act of 1990).
(b) Nonbusiness Property.--
(1) In general.--Subpart A of part IV of subchapter A of
chapter 1 (relating to nonrefundable personal credits) is
amended by inserting after section 25C the following new
section:
``SEC. 25D. NONBUSINESS QUALIFIED FUEL CELL POWER PLANT.
``(a) In General.--In the case of an individual, there shall be
allowed as a credit against the tax imposed by this chapter for the
taxable year an amount equal to 10 percent of the qualified fuel cell
power plant expenditures which are paid or incurred during such year.
``(b) Limitations.--The credit allowed under subsection (a) with
respect to any qualified fuel cell power plant for any taxable year
shall not exceed--
``(1) $500 for each \1/2\ kilowatt of capacity of the power
plant, reduced by
``(2) the aggregate energy credits allowed with respect to
such power plant for all prior taxable years.
``(c) Qualified Fuel Cell Power Plant Expenditures.--For purposes
of this section, the term `qualified fuel cell power plant
expenditures' means expenditures by the taxpayer for any qualified fuel
cell power plant (as defined in section 48(a)(4))--
``(1) which meets the requirements of subparagraphs (B) and
(D) of section 48(a)(3), and
``(2) which is installed on or in connection with a
dwelling unit--
``(A) which is located in the United States, and
``(B) which is used by the taxpayer as a residence.
Such term includes expenditures for labor costs properly allocable to
the onsite preparation, assembly, or original installation of the
property.
``(d) Special Rules.--For purposes of this section, rules similar
to the rules of section 25C(d) shall apply.
``(e) Basis Adjustments.--For purposes of this subtitle, if a
credit is allowed under this section for any expenditure with respect
to any property, the increase in the basis of such property which would
(but for this subsection) result from such expenditure shall be reduced
by the amount of the credit so allowed.
``(f) Termination.--This section shall not apply to any expenditure
made after December 31, 2006.''.
(2) Conforming amendments.--
(A) Subsection (a) of section 1016 is amended by
striking ``and'' at the end of paragraph (28), by
striking the period at the end of paragraph (29) and
inserting ``, and'', and by adding at the end the
following new paragraph:
``(30) to the extent provided in section 25D(e), in the
case of amounts with respect to which a credit has been allowed
under section 25D.''.
(B) The table of sections for subpart A of part IV
of subchapter A of chapter 1 is amended by inserting
after the item relating to section 25C the following
new item:
``Sec. 25D. Nonbusiness qualified fuel
cell power plant.''.
(3) Effective date.--The amendments made by this subsection
shall apply to expenditures paid or incurred after December 31,
2003, in taxable years ending after such date.
SEC. 104. CREDIT FOR ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.
(a) In General.--Subpart A of part IV of subchapter A of chapter 1
(relating to nonrefundable personal credits) is amended by inserting
after section 25D the following new section:
``SEC. 25E. ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.
``(a) Allowance of Credit.--In the case of an individual, there
shall be allowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to 20 percent of the amount paid
or incurred by the taxpayer for qualified energy efficiency
improvements installed during such taxable year.
``(b) Limitations.--
``(1) Maximum credit.--The credit allowed by this section
with respect to a dwelling shall not exceed $2,000.
``(2) Prior credit amounts for taxpayer on same dwelling
taken into account.--If a credit was allowed to the taxpayer
under subsection (a) with respect to a dwelling in 1 or more
prior taxable years, the amount of the credit otherwise
allowable for the taxable year with respect to that dwelling
shall not exceed the amount of $2,000 reduced by the sum of the
credits allowed under subsection (a) to the taxpayer with
respect to the dwelling for all prior taxable years.
``(c) Carryforward of Unused Credit.--If the credit allowable under
subsection (a) exceeds the limitation imposed by section 26(a) for such
taxable year reduced by the sum of the credits allowable under this
subpart (other than this section) for such taxable year, such excess
shall be carried to the succeeding taxable year and added to the credit
allowable under subsection (a) for such succeeding taxable year.
``(d) Qualified Energy Efficiency Improvements.--For purposes of
this section, the term `qualified energy efficiency improvements' means
any energy efficient building envelope component which meets the
prescriptive criteria for such component established by the 2000
International Energy Conservation Code (or, in the case of metal roofs
with appropriate pigmented coatings, meets the Energy Star program
requirements), if--
``(1) such component is installed in or on a dwelling--
``(A) located in the United States, and
``(B) owned and used by the taxpayer as the
taxpayer's principal residence (within the meaning of
section 121),
``(2) the original use of such component commences with the
taxpayer, and
``(3) such component reasonably can be expected to remain
in use for at least 5 years.
If the aggregate cost of such components with respect to any dwelling
exceeds $1,000, such components shall be treated as qualified energy
efficiency improvements only if such components are also certified in
accordance with subsection (e) as meeting such criteria.
``(e) Certification.--The certification described in subsection (d)
shall be--
``(1) determined on the basis of the technical
specifications or applicable ratings (including product
labeling requirements) for the measurement of energy
efficiency, based upon energy use or building envelope
component performance, for the energy efficient building
envelope component,
``(2) provided by a local building regulatory authority, a
utility, a manufactured home production inspection primary
inspection agency (IPIA), or an accredited home energy rating
system provider who is accredited by or otherwise authorized to
use approved energy performance measurement methods by the
Residential Energy Services Network (RESNET), and
``(3) made in writing in a manner that specifies in readily
verifiable fashion the energy efficient building envelope
components installed and their respective energy efficiency
levels.
``(f) Definitions and Special Rules.--
``(1) Tenant-stockholder in cooperative housing
corporation.--In the case of an individual who is a tenant-
stockholder (as defined in section 216) in a cooperative
housing corporation (as defined in such section), such
individual shall be treated as having paid his tenant-
stockholder's proportionate share (as defined in section
216(b)(3)) of the cost of qualified energy efficiency
improvements made by such corporation.
``(2) Condominiums.--
``(A) In general.--In the case of an individual who
is a member of a condominium management association
with respect to a condominium which he owns, such
individual shall be treated as having paid his
proportionate share of the cost of qualified energy
efficiency improvements made by such association.
``(B) Condominium management association.--For
purposes of this paragraph, the term `condominium
management association' means an organization which
meets the requirements of paragraph (1) of section
528(c) (other than subparagraph (E) thereof) with
respect to a condominium project substantially all of
the units of which are used as residences.
``(3) Building envelope component.--The term `building
envelope component' means insulation material or system which
is specifically and primarily designed to reduce the heat loss
or gain of a dwelling when installed in or on such dwelling,
exterior windows (including skylights) and doors, and metal
roofs with appropriate pigmented coatings which are
specifically and primarily designed to reduce the heat gain of
a dwelling when installed in or on such dwelling.
``(4) Manufactured homes included.--For purposes of this
section, the term `dwelling' includes a manufactured home which
conforms to Federal Manufactured Home Construction and Safety
Standards (section 3280 of title 24, Code of Federal
Regulations, as in effect on April 3, 2003).
``(g) Basis Adjustment.--For purposes of this subtitle, if a credit
is allowed under this section for any expenditure with respect to any
property, the increase in the basis of such property which would (but
for this subsection) result from such expenditure shall be reduced by
the amount of the credit so allowed.
``(h) Application of Section.--This section shall apply to
qualified energy efficiency improvements installed after December 31,
2003, and before January 1, 2007.''.
(b) Conforming Amendments.--
(1) Subsection (c) of section 23 is amended by striking
``section 1400C'' and inserting ``sections 25E and 1400C''.
(2) Subsection (a) of section 1016 is amended by striking
``and'' at the end of paragraph (29), by striking the period at
the end of paragraph (30) and inserting ``, and'', and by
adding at the end the following new paragraph:
``(31) to the extent provided in section 25E(g), in the
case of amounts with respect to which a credit has been allowed
under section 25E.''.
(3) Subsection (d) of section 1400C is amended by inserting
``and section 25E'' after ``this section''.
(4) The table of sections for subpart A of part IV of
subchapter A of chapter 1 is amended by inserting after the
item relating to section 25D the following new item:
``Sec. 25E. Energy efficiency
improvements to existing
homes.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years ending after December 31, 2003.
SEC. 105. BUSINESS CREDIT FOR CONSTRUCTION OF NEW ENERGY EFFICIENT
HOME.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(relating to business related credits) is amended by inserting after
section 45F the following new section:
``SEC. 45G. NEW ENERGY EFFICIENT HOME CREDIT.
``(a) In General.--For purposes of section 38, in the case of an
eligible contractor, the credit determined under this section for the
taxable year is an amount equal to the aggregate adjusted bases of all
energy efficient property installed in a qualified new energy efficient
home during construction of such home.
``(b) Limitations.--
``(1) Maximum credit.--
``(A) In general.--The credit allowed by this
section with respect to a dwelling shall not exceed
$2,000.
``(B) Prior credit amounts on same dwelling taken
into account.--If a credit was allowed under subsection
(a) with respect to a dwelling in 1 or more prior
taxable years, the amount of the credit otherwise
allowable for the taxable year with respect to that
dwelling shall not exceed the amount of $2,000 reduced
by the sum of the credits allowed under subsection (a)
with respect to the dwelling for all prior taxable
years.
``(2) Coordination with rehabilitation and energy
credits.--For purposes of this section--
``(A) the basis of any property referred to in
subsection (a) shall be reduced by that portion of the
basis of any property which is attributable to
qualified rehabilitation expenditures (as defined in
section 47(c)(2)) or to the energy percentage of energy
property (as determined under section 48(a)), and
``(B) expenditures taken into account under either
section 47 or 48(a) shall not be taken into account
under this section.
``(c) Definitions.--For purposes of this section--
``(1) Eligible contractor.--The term `eligible contractor'
means the person who constructed the new energy efficient home,
or in the case of a manufactured home which conforms to Federal
Manufactured Home Construction and Safety Standards (section
3280 of title 24, Code of Federal Regulations, as in effect on
April 3, 2003), the manufactured home producer of such home.
``(2) Energy efficient property.--The term `energy
efficient property' means any energy efficient building
envelope component, and any energy efficient heating or cooling
appliance.
``(3) Qualified new energy efficient home.--The term
`qualified new energy efficient home' means a dwelling--
``(A) located in the United States,
``(B) the construction of which is substantially
completed after December 31, 2003,
``(C) the original use of which is as a principal
residence (within the meaning of section 121) which
commences with the person who acquires such dwelling
from the eligible contractor, and
``(D) which is certified to have a level of annual
heating and cooling energy consumption that is at least
30 percent below the annual level of heating and
cooling energy consumption of a comparable dwelling
constructed in accordance with the standards of the
2000 International Energy Conservation Code and to have
building envelope component improvements account for
\1/3\ of such 30 percent.
``(4) Construction.--The term `construction' includes
reconstruction and rehabilitation.
``(5) Acquire.--The term `acquire' includes purchase and,
in the case of reconstruction and rehabilitation, such term
includes a binding written contract for such reconstruction or
rehabilitation.
``(6) Building envelope component.--The term `building
envelope component' means insulation material or system which
is specifically and primarily designed to reduce the heat loss
or gain of a dwelling when installed in or on such dwelling,
exterior windows (including skylights) and doors, and metal
roofs with appropriate pigmented coatings which are
specifically and primarily designed to reduce the heat gain of
a dwelling when installed in or on such dwelling.
``(7) Manufactured home included.--The term `dwelling'
includes a manufactured home conforming to Federal Manufactured
Home Construction and Safety Standards (section 3280 of title
24, Code of Federal Regulations, as in effect on April 3,
2003).
``(d) Certification.--
``(1) Method.--A certification described in subsection
(c)(3)(D) shall be determined on the basis of one of the
following methods:
``(A) The technical specifications or applicable
ratings (including product labeling requirements) for
the measurement of energy efficiency for the energy
efficient building envelope component or energy
efficient heating or cooling appliance, based upon
energy use or building envelope component performance.
``(B) An energy performance measurement method that
utilizes computer software approved by organizations
designated by the Secretary.
``(2) Provider.--Such certification shall be provided by--
``(A) in the case of a method described in
paragraph (1)(A), a local building regulatory
authority, a utility, a manufactured home production
inspection primary inspection agency (IPIA), or an
accredited home energy rating systems provider who is
accredited by, or otherwise authorized to use, approved
energy performance measurement methods by the Home
Energy Ratings Systems Council or the National
Association of State Energy Officials, or
``(B) in the case of a method described in
paragraph (1)(B), an individual recognized by an
organization designated by the Secretary for such
purposes.
``(3) Form.--Such certification shall be made in writing in
a manner that specifies in readily verifiable fashion the
energy efficient building envelope components and energy
efficient heating or cooling appliances installed and their respective
energy efficiency levels, and in the case of a method described in
subparagraph (B) of paragraph (1), accompanied by written analysis
documenting the proper application of a permissible energy performance
measurement method to the specific circumstances of such dwelling.
``(4) Regulations.--
``(A) In general.--In prescribing regulations under
this subsection for energy performance measurement
methods, the Secretary shall prescribe procedures for
calculating annual energy costs for heating and cooling
and cost savings and for the reporting of the results.
Such regulations shall--
``(i) be based on the National Home Energy
Rating Technical Guidelines of the National
Association of State Energy Officials, the Home
Energy Rating Guidelines of the Home Energy
Rating Systems Council, or the modified 2001
California Residential ACM manual,
``(ii) provide that any calculation
procedures be developed such that the same
energy efficiency measures allow a home to
qualify for the credit under this section
regardless of whether the house uses a gas or
oil furnace or boiler or an electric heat pump,
and
``(iii) require that any computer software
allow for the printing of the Federal tax forms
necessary for the credit under this section and
explanations for the homebuyer of the energy
efficient features that were used to comply
with the requirements of this section.
``(B) Providers.--For purposes of paragraph (2)(B),
the Secretary shall establish requirements for the
designation of individuals based on the requirements
for energy consultants and home energy raters specified
by the National Association of State Energy Officials.
``(e) Basis Adjustment.--For purposes of this subtitle, if a credit
is determined under this section for any expenditure with respect to
any property, the increase in the basis of such property which would
(but for this subsection) result from such expenditure shall be reduced
by the amount of the credit so determined.
``(f) Application of Section.--Subsection (a) shall apply to
dwellings purchased during the period beginning on January 1, 2004, and
ending on December 31, 2006.''.
(b) Credit Made Part of General Business Credit.--Subsection (b) of
section 38 (relating to current year business credit) is amended by
striking ``plus'' at the end of paragraph (14), by striking the period
at the end of paragraph (15) and inserting ``, plus'', and by adding at
the end thereof the following new paragraph:
``(16) the new energy efficient home credit determined
under section 45G.''.
(c) Denial of Double Benefit.--Section 280C (relating to certain
expenses for which credits are allowable) is amended by adding at the
end thereof the following new subsection:
``(d) New Energy Efficient Home Expenses.--No deduction shall be
allowed for that portion of expenses for a new energy efficient home
otherwise allowable as a deduction for the taxable year which is equal
to the amount of the credit determined for such taxable year under
section 45G.''.
(d) Limitation on Carryback.--Subsection (d) of section 39 is
amended by adding at the end the following new paragraph:
``(11) No carryback of new energy efficient home credit
before effective date.--No portion of the unused business
credit for any taxable year which is attributable to the credit
determined under section 45G may be carried back to any taxable
year ending before January 1, 2004.''.
(e) Deduction for Certain Unused Business Credits.--Subsection (c)
of section 196 is amended by striking ``and'' at the end of paragraph
(9), by striking the period at the end of paragraph (10) and inserting
``, and'', and by adding after paragraph (10) the following new
paragraph:
``(11) the new energy efficient home credit determined
under section 45G.''.
(f) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 is amended by inserting after the
item relating to section 45F the following new item:
``Sec. 45G. New energy efficient home
credit.''.
(g) Effective Date.--The amendments made by this section shall
apply to taxable years ending after December 31, 2003.
SEC. 106. ENERGY CREDIT FOR COMBINED HEAT AND POWER SYSTEM PROPERTY.
(a) In General.--Subparagraph (A) of section 48(a)(3) (defining
energy property) is amended by striking ``or'' at the end of clause
(ii), by adding ``or'' at the end of clause (iii), and by inserting
after clause (iii) the following new clause:
``(iv) combined heat and power system
property,''.
(b) Combined Heat and Power System Property.--Subsection (a) of
section 48 is amended by redesignating paragraphs (5) and (6) as
paragraphs (6) and (7), respectively, and by inserting after paragraph
(4) the following new paragraph:
``(5) Combined heat and power system property.--For
purposes of this subsection--
``(A) Combined heat and power system property.--The
term `combined heat and power system property' means
property comprising a system--
``(i) which uses the same energy source for
the simultaneous or sequential generation of
electrical power, mechanical shaft power, or
both, in combination with the generation of
steam or other forms of useful thermal energy
(including heating and cooling applications),
``(ii) which has an electrical capacity of
more than 50 kilowatts or a mechanical energy
capacity of more than 67 horsepower or an equivalent combination of
electrical and mechanical energy capacities,
``(iii) which produces--
``(I) at least 20 percent of its
total useful energy in the form of
thermal energy, and
``(II) at least 20 percent of its
total useful energy in the form of
electrical or mechanical power (or
combination thereof),
``(iv) the energy efficiency percentage of
which exceeds 60 percent (70 percent in the
case of a system with an electrical capacity in
excess of 50 megawatts or a mechanical energy
capacity in excess of 67,000 horsepower, or an
equivalent combination of electrical and
mechanical energy capacities), and
``(v) which is placed in service after
December 31, 2003, and before January 1, 2007.
``(B) Special rules.--
``(i) Energy efficiency percentage.--For
purposes of subparagraph (A)(iv), the energy
efficiency percentage of a system is the
fraction--
``(I) the numerator of which is the
total useful electrical, thermal, and
mechanical power produced by the system
at normal operating rates, and
``(II) the denominator of which is
the lower heating value of the primary
fuel source for the system.
``(ii) Determinations made on btu basis.--
The energy efficiency percentage and the
percentages under subparagraph (A)(iii) shall
be determined on a Btu basis.
``(iii) Input and output property not
included.--The term `combined heat and power
system property' does not include property used
to transport the energy source to the facility
or to distribute energy produced by the
facility.
``(iv) Public utility property.--
``(I) Accounting rule for public
utility property.--If the combined heat
and power system property is public
utility property (as defined in section
168(i)(1)), the taxpayer may only claim
the credit under the subsection if,
with respect to such property, the
taxpayer uses a normalization method of
accounting.
``(II) Certain exception not to
apply.--The matter in paragraph (3)
which follows subparagraph (D) shall
not apply to combined heat and power
system property.
``(C) Extension of depreciation recovery period.--
If a taxpayer is allowed credit under this section for
combined heat and power system property and such
property would (but for this subparagraph) have a class
life of 15 years or less under section 168, such
property shall be treated as having a 22-year class
life for purposes of section 168.''.
(c) No Carryback of Energy Credit Before Effective Date.--
Subsection (d) of section 39 is amended by adding at the end the
following new paragraph:
``(12) No carryback of energy credit before effective
date.--No portion of the unused business credit for any taxable
year which is attributable to the energy credit with respect to
property described in section 48(a)(5) may be carried back to a
taxable year ending before January 1, 2004.''.
(d) Effective Date.--The amendments made by this section shall
apply to property placed in service after December 31, 2003, in taxable
years ending after such date.
SEC. 107. NEW NONREFUNDABLE PERSONAL CREDITS ALLOWED AGAINST REGULAR
AND MINIMUM TAXES.
(a) In General.--
(1) Section 25c.--Section 25C(b), as added by section 101,
is amended by adding at the end the following new paragraph:
``(3) Limitation based on amount of tax.--The credit
allowed under subsection (a) for the taxable year shall not
exceed the excess of--
``(A) the sum of the regular tax liability (as
defined in section 26(b)) plus the tax imposed by
section 55, over
``(B) the sum of the credits allowable under this
subpart (other than this section and section 25D and
25E) and section 27 for the taxable year.''.
(2) Section 25d.--Section 25D(b), as added by section 103,
is amended to read as follows:
``(b) Limitations.--
``(1) In general.--The credit allowed under subsection (a)
with respect to any qualified fuel cell power plant for any
taxable year shall not exceed--
``(A) $500 for each \1/2\ kilowatt of capacity of
the power plant, reduced by
``(B) the aggregate energy credits allowed with
respect to such power plant for all prior taxable
years.
``(2) Limitation based on amount of tax.--The credit
allowed under subsection (a) for the taxable year shall not
exceed the excess of--
``(A) the sum of the regular tax liability (as
defined in section 26(b)) plus the tax imposed by
section 55, over
``(B) the sum of the credits allowable under this
subpart (other than this section and section 25E) and
section 27 for the taxable year.''.
(3) Section 25e.--Section 25E(b), as added by section 104,
is amended by adding at the end the following new paragraph:
``(3) Limitation based on amount of tax.--The credit
allowed under subsection (a) for the taxable year shall not
exceed the excess of--
``(A) the sum of the regular tax liability (as
defined in section 26(b)) plus the tax imposed by
section 55, over
``(B) the sum of the credits allowable under this
subpart (other than this section) and section 27 for
the taxable year.''.
(b) Conforming Amendments.--
(1) Section 23(b)(4)(B) is amended by inserting ``and
sections 25C, 25D, and 25E'' after ``this section''.
(2) Section 24(b)(3)(B) is amended by striking ``and 25B''
and inserting ``, 25B, 25C, 25D, and 25E''.
(3) Section 25(e)(1)(C) is amended by inserting ``25C, 25D,
and 25E'' after ``25B,''.
(4) Section 25B(g)(2) is amended by striking ``section 23''
and inserting ``sections 23, 25C, 25D, and 25E''.
(5) Section 25E(c), as added by section 104, is amended by
striking ``section 26(a) for such taxable year reduced by the
sum of the credits allowable under this subpart (other than
this section)'' and inserting ``subsection (b)(3)''.
(6) Section 26(a)(1) is amended by striking ``and 25B'' and
inserting ``25B, 25C, 25D, and 25E''.
(7) Section 904(h) is amended by striking ``and 25B'' and
inserting ``25B, 25C, 25D, and 25E''.
(8) Section 1400C(d) is amended by striking ``and 25B'' and
inserting ``25B, 25C, 25D, and 25E''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2003.
SEC. 108. REPEAL OF 4.3-CENT MOTOR FUEL EXCISE TAXES ON RAILROADS AND
INLAND WATERWAY TRANSPORTATION WHICH REMAIN IN GENERAL
FUND.
(a) Taxes on Trains.--
(1) In general.--Subparagraph (A) of section 4041(a)(1) is
amended by striking ``or a diesel-powered train'' each place it
appears and by striking ``or train''.
(2) Conforming amendments.--
(A) Subparagraph (C) of section 4041(a)(1) is
amended by striking clause (ii) and by redesignating
clause (iii) as clause (ii).
(B) Subparagraph (C) of section 4041(b)(1) is
amended by striking all that follows ``section
6421(e)(2)'' and inserting a period.
(C) Subsection (d) of section 4041 is amended by
redesignating paragraph (3) as paragraph (4) and by
inserting after paragraph (2) the following new
paragraph:
``(3) Diesel fuel used in trains.--There is hereby imposed
a tax of 0.1 cent per gallon on any liquid other than gasoline
(as defined in section 4083)--
``(A) sold by any person to an owner, lessee, or
other operator of a diesel-powered train for use as a
fuel in such train, or
``(B) used by any person as a fuel in a diesel-
powered train unless there was a taxable sale of such
fuel under subparagraph (A).
No tax shall be imposed by this paragraph on the sale or use of
any liquid if tax was imposed on such liquid under section
4081.''.
(D) Subsection (f) of section 4082 is amended by
striking ``section 4041(a)(1)'' and inserting
``subsections (d)(3) and (a)(1) of section 4041,
respectively''.
(E) Paragraph (3) of section 4083(a) is amended by
striking ``or a diesel-powered train''.
(F) Paragraph (3) of section 6421(f) is amended to
read as follows:
``(3) Gasoline used in trains.--In the case of gasoline
used as a fuel in a train, this section shall not apply with
respect to the Leaking Underground Storage Tank Trust Fund
financing rate under section 4081.''.
(G) Paragraph (3) of section 6427(l) is amended to
read as follows:
``(3) Refund of certain taxes on fuel used in diesel-
powered trains.--For purposes of this subsection, the term
`nontaxable use' includes fuel used in a diesel-powered train.
The preceding sentence shall not apply to the tax imposed by
section 4041(d) and the Leaking Underground Storage Tank Trust
Fund financing rate under section 4081 except with respect to
fuel sold for exclusive use by a State or any political
subdivision thereof.''.
(b) Fuel Used on Inland Waterways.--
(1) In general.--Paragraph (1) of section 4042(b) is
amended by adding ``and'' at the end of subparagraph (A), by
striking ``, and'' at the end of subparagraph (B) and inserting
a period, and by striking subparagraph (C).
(2) Conforming amendment.--Paragraph (2) of section 4042(b)
is amended by striking subparagraph (C).
(c) Effective Date.--The amendments made by this section shall take
effect on January 1, 2004.
SEC. 109. REDUCED MOTOR FUEL EXCISE TAX ON CERTAIN MIXTURES OF DIESEL
FUEL.
(a) In General.--Paragraph (2) of section 4081(a) is amended by
adding at the end the following:
``(C) Diesel-water fuel emulsion.--In the case of
diesel-water fuel emulsion at least 14 percent of which
is water and with respect to which the emulsion
additive is registered by a United States manufacturer
with the Environmental Protection Agency pursuant to
section 211 of the Clean Air Act (as in effect on March
31, 2003), subparagraph (A)(iii) shall be applied by
substituting `19.7 cents' for `24.3 cents'.''.
(b) Special Rules for Diesel-Water Fuel Emulsions.--
(1) Refunds for tax-paid purchases.--Section 6427 is
amended by redesignating subsections (m) through (p) as
subsections (n) through (q), respectively, and by inserting
after subsection (l) the following new subsection:
``(m) Diesel Fuel Used To Produce Emulsion.--
``(1) In general.--Except as provided in subsection (k), if
any diesel fuel on which tax was imposed by section 4081 at the
regular tax rate is used by any person in producing an emulsion
described in section 4081(a)(2)(C) which is sold or used in
such person's trade or business, the Secretary shall pay
(without interest) to such person an amount equal to the excess of the
regular tax rate over the incentive tax rate with respect to such fuel.
``(2) Definitions.--For purposes of paragraph (1)--
``(A) Regular tax rate.--The term `regular tax
rate' means the aggregate rate of tax imposed by
section 4081 determined without regard to section
4081(a)(2)(C).
``(B) Incentive tax rate.--The term `incentive tax
rate' means the aggregate rate of tax imposed by
section 4081 determined with regard to section
4081(a)(2)(C).''.
(2) Later separation of fuel.--
(A) In general.--Section 4081 (relating to
imposition of tax) is amended by redesignating
subsections (d) and (e) as subsections (e) and (f),
respectively, and by inserting after subsection (c) the
following new subsection:
``(d) Later Separation of Fuel From Diesel-Water Fuel Emulsion.--If
any person separates the taxable fuel from a diesel-water fuel emulsion
on which tax was imposed under subsection (a) at a rate determined
under subsection (a)(2)(C) (or with respect to which a credit or
payment was allowed or made by reason of section 6427), such person
shall be treated as the refiner of such taxable fuel. The amount of tax
imposed on any removal of such fuel by such person shall be reduced by
the amount of tax imposed (and not credited or refunded) on any prior
removal or entry of such fuel.''.
(B) Conforming amendment.--Subsection (d) of
section 6416 is amended by striking ``section 4081(e)''
and inserting ``section 4081(f)''.
(c) Effective Date.--The amendments made by this section shall take
effect on October 1, 2003.
SEC. 110. REPEAL OF PHASEOUTS FOR QUALIFIED ELECTRIC VEHICLE CREDIT AND
DEDUCTION FOR CLEAN FUEL-VEHICLES.
(a) Credit for Qualified Electric Vehicles.--Subsection (b) of
section 30 (relating to limitations) is amended by striking paragraph
(2) and redesignating paragraph (3) as paragraph (2).
(b) Deduction for Clean-Fuel Vehicles and Certain Refueling
Property.--Paragraph (1) of section 179A(b) (relating to qualified
clean-fuel vehicle property) is amended to read as follows:
``(1) Qualified clean-fuel vehicle property.-- The cost
which may be taken into account under subsection (a)(1)(A) with
respect to any motor vehicle shall not exceed--
``(A) in the case of a motor vehicle not described
in subparagraph (B) or (C), $2,000,
``(B) in the case of any truck or van with a gross
vehicle weight rating greater than 10,000 pounds but
not greater than 26,000 pounds, $5,000, or
``(C) $50,000 in the case of--
``(i) a truck or van with a gross vehicle
weight rating greater than 26,000 pounds, or
``(ii) any bus which has a seating capacity
of at least 20 adults (not including the
driver).''.
SEC. 111. ALTERNATIVE MOTOR VEHICLE CREDIT.
(a) In General.--Subpart B of part IV of subchapter A of chapter 1
(relating to foreign tax credit, etc.) is amended by adding at the end
the following:
``SEC. 30B. ALTERNATIVE MOTOR VEHICLE CREDIT.
``(a) Allowance of Credit.--There shall be allowed as a credit
against the tax imposed by this chapter for the taxable year an amount
equal to the sum of--
``(1) the new qualified fuel cell motor vehicle credit
determined under subsection (b), and
``(2) the advanced lean burn technology motor vehicle
credit determined under subsection (c).
``(b) New Qualified Fuel Cell Motor Vehicle Credit.--
``(1) In general.--For purposes of subsection (a), the new
qualified fuel cell motor vehicle credit determined under this
subsection with respect to a new qualified fuel cell motor
vehicle placed in service by the taxpayer during the taxable
year is--
``(A) $4,000, if such vehicle has a gross vehicle
weight rating of not more than 8,500 pounds,
``(B) $10,000, if such vehicle has a gross vehicle
weight rating of more than 8,500 pounds but not more
than 14,000 pounds,
``(C) $20,000, if such vehicle has a gross vehicle
weight rating of more than 14,000 pounds but not more
than 26,000 pounds, and
``(D) $40,000, if such vehicle has a gross vehicle
weight rating of more than 26,000 pounds.
``(2) Increase for fuel efficiency.--
``(A) In general.--The amount determined under
paragraph (1)(A) with respect to a new qualified fuel
cell motor vehicle which is a passenger automobile or
light truck shall be increased by--
``(i) $1,000, if such vehicle achieves at
least 150 percent but less than 175 percent of
the 2000 model year city fuel economy,
``(ii) $1,500, if such vehicle achieves at
least 175 percent but less than 200 percent of
the 2000 model year city fuel economy,
``(iii) $2,000, if such vehicle achieves at
least 200 percent but less than 225 percent of
the 2000 model year city fuel economy,
``(iv) $2,500, if such vehicle achieves at
least 225 percent but less than 250 percent of
the 2000 model year city fuel economy,
``(v) $3,000, if such vehicle achieves at
least 250 percent but less than 275 percent of
the 2000 model year city fuel economy,
``(vi) $3,500, if such vehicle achieves at
least 275 percent but less than 300 percent of
the 2000 model year city fuel economy, and
``(vii) $4,000, if such vehicle achieves at
least 300 percent of the 2000 model year city
fuel economy.
``(B) 2000 model year city fuel economy.--For
purposes of subparagraph (A), the 2000 model year city
fuel economy with respect to a vehicle shall be
determined in accordance with the following tables:
``(i) In the case of a passenger
automobile:
``If vehicle inertia weight class The 2000 model year city fuel
is: economy is:
1,500 or 1,750 lbs............................ 43.7 mpg
2,000 lbs..................................... 38.3 mpg
2,250 lbs..................................... 34.1 mpg
2,500 lbs..................................... 30.7 mpg
2,750 lbs..................................... 27.9 mpg
3,000 lbs..................................... 25.6 mpg
3,500 lbs..................................... 22.0 mpg
4,000 lbs..................................... 19.3 mpg
4,500 lbs..................................... 17.2 mpg
5,000 lbs..................................... 15.5 mpg
5,500 lbs..................................... 14.1 mpg
6,000 lbs..................................... 12.9 mpg
6,500 lbs..................................... 11.9 mpg
7,000 or 8,500 lbs............................ 11.1 mpg.
``(ii) In the case of a light truck:
``If vehicle inertia weight class The 2000 model year city fuel
is: economy is:
1,500 or 1,750 lbs............................ 37.6 mpg
2,000 lbs..................................... 33.7 mpg
2,250 lbs..................................... 30.6 mpg
2,500 lbs..................................... 28.0 mpg
2,750 lbs..................................... 25.9 mpg
3,000 lbs..................................... 24.1 mpg
3,500 lbs..................................... 21.3 mpg
4,000 lbs..................................... 19.0 mpg
4,500 lbs..................................... 17.3 mpg
5,000 lbs..................................... 15.8 mpg
5,500 lbs..................................... 14.6 mpg
6,000 lbs..................................... 13.6 mpg
6,500 lbs..................................... 12.8 mpg
7,000 or 8,500 lbs............................ 12.0 mpg.
``(C) Vehicle inertia weight class.--For purposes
of subparagraph (B), the term `vehicle inertia weight
class' has the same meaning as when defined in
regulations prescribed by the Administrator of the
Environmental Protection Agency for purposes of the
administration of title II of the Clean Air Act (42
U.S.C. 7521 et seq.).
``(3) New qualified fuel cell motor vehicle.--For purposes
of this subsection, the term `new qualified fuel cell motor
vehicle' means a motor vehicle--
``(A) which is propelled by power derived from one
or more cells which convert chemical energy directly
into electricity by combining oxygen with hydrogen fuel
which is stored on board the vehicle in any form and
may or may not require reformation prior to use,
``(B) which, in the case of a passenger automobile
or light truck--
``(i) for 2004 and later model vehicles,
has received a certificate of conformity under
the Clean Air Act and meets or exceeds the
equivalent qualifying California low emission
vehicle standard under section 243(e)(2) of the
Clean Air Act for that make and model year, and
``(ii) for 2004 and later model vehicles,
has received a certificate that such vehicle
meets or exceeds the Bin 5 Tier II emission
level established in regulations prescribed by
the Administrator of the Environmental
Protection Agency under section 202(i) of the
Clean Air Act for that make and model year
vehicle,
``(C) the original use of which commences with the
taxpayer,
``(D) which is acquired for use or lease by the
taxpayer and not for resale, and
``(E) which is made by a manufacturer.
``(c) Advanced Lean Burn Technology Motor Vehicle Credit.--
``(1) In general.--For purposes of subsection (a), the
advanced lean burn technology motor vehicle credit determined
under this subsection with respect to a new qualified advanced
lean burn technology motor vehicle placed in service by the
taxpayer during the taxable year is the credit amount
determined under paragraph (2).
``(2) Credit amount.--
``(A) Increase for fuel efficiency.--The credit
amount determined under this paragraph shall be--
``(i) $500, if such vehicle achieves at
least 125 percent but less than 150 percent of
the 2000 model year city fuel economy,
``(ii) $1,000, if such vehicle achieves at
least 150 percent but less than 175 percent of
the 2000 model year city fuel economy,
``(iii) $1,500, if such vehicle achieves at
least 175 percent but less than 200 percent of
the 2000 model year city fuel economy,
``(iv) $2,000, if such vehicle achieves at
least 200 percent but less than 225 percent of
the 2000 model year city fuel economy,
``(v) $2,500, if such vehicle achieves at
least 225 percent but less than 250 percent of
the 2000 model year city fuel economy, and
``(vi) $3,000, if such vehicle achieves at
least 250 percent of the 2000 model year city
fuel economy.
For purposes of clause (i), the 2000 model year city
fuel economy with respect to a vehicle shall be
determined using the tables provided in subsection
(b)(2)(B) with respect to such vehicle.
``(B) Conservation credit.--The amount determined
under subparagraph (A) with respect to an advanced lean
burn technology motor vehicle shall be increased by--
``(i) $250, if such vehicle achieves a
lifetime fuel savings of at least 1,500 gallons
of gasoline, and
``(ii) $500, if such vehicle achieves a
lifetime fuel savings of at least 2,500 gallons
of gasoline.
``(C) Option to use like vehicle.--At the option of
the vehicle manufacturer, the increase for fuel
efficiency and conservation credit may be calculated by
comparing the new advanced lean-burn technology motor
vehicle to a like vehicle.
``(3) Definitions.--For purposes of this subsection--
``(A) Advanced lean burn technology motor
vehicle.--The term `advanced lean burn technology motor
vehicle' means a motor vehicle with an internal
combustion engine that--
``(i) is designed to operate primarily
using more air than is necessary for complete
combustion of the fuel,
``(ii) incorporates direct injection,
``(iii) achieves at least 125 percent of
the 2000 model year city fuel economy, and
``(iv) for 2004 and later model vehicles,
has received a certificate that such vehicle
meets or exceeds the Bin 8 Tier II emission
level established in regulations prescribed by
the Administrator of the Environmental
Protection Agency under section 202(i) of the
Clean Air Act for that make and model year
vehicle.
``(B) Like vehicle.--The term `like vehicle' for an
advanced lean burn technology motor vehicle derived
from a conventional production vehicle produced in the
same model year means a model that is equivalent in the
following areas:
``(i) Body style (2-door or 4-door).
``(ii) Transmission (automatic or manual).
``(iii) Acceleration performance
(<plus-minus> 0.05 seconds).
``(iv) Drivetrain (2-wheel drive or 4-wheel
drive).
``(v) Certification by the Administrator of
the Environmental Protection Agency.
``(C) Lifetime fuel savings.--The term `lifetime
fuel savings' shall be calculated by dividing 120,000
by the difference between the 2000 model year city fuel
economy for the vehicle inertia weight class and the
city fuel economy for the new qualified hybrid motor
vehicle.
``(d) Limitation Based on Amount of Tax.--The credit allowed under
subsection (a) for the taxable year shall not exceed the excess of--
``(1) the sum of the regular tax liability (as defined in
section 26(b)) plus the tax imposed by section 55, over
``(2) the sum of the credits allowable under subpart A and
sections 27, 29, and 30A for the taxable year.
``(e) Other Definitions and Special Rules.--For purposes of this
section--
``(1) Consumable fuel.--The term `consumable fuel' means
any solid, liquid, or gaseous matter which releases energy when
consumed by an auxiliary power unit.
``(2) Motor vehicle.--The term `motor vehicle' has the
meaning given such term by section 30(c)(2).
``(3) 2000 model year city fuel economy.--The 2000 model
year city fuel economy with respect to any vehicle shall be
measured under rules similar to the rules under section
4064(c).
``(4) Other terms.--The terms `automobile', `passenger
automobile', `light truck', and `manufacturer' have the
meanings given such terms in regulations prescribed by the
Administrator of the Environmental Protection Agency for
purposes of the administration of title II of the Clean Air Act
(42 U.S.C. 7521 et seq.).
``(5) Reduction in basis.--For purposes of this subtitle,
if a credit is allowed under this section for any expenditure
with respect to any property, the increase in the basis of such
property which would (but for this paragraph) result from such
expenditure shall be reduced by the amount of the credit so
allowed.
``(6) No double benefit.--The amount of any deduction or
credit allowable under this chapter (other than the credit
allowable under this section), with respect to a vehicle
described under subsection (b), shall be reduced by the amount
of credit allowed under subsection (a) for such vehicle for the
taxable year.
``(7) Property used by tax-exempt entities.--In the case of
a credit amount which is allowable with respect to a motor
vehicle which is acquired by an entity exempt from tax under
this chapter, the person which sells or leases such vehicle to
the entity shall be treated as the taxpayer with respect to the
vehicle for purposes of this section and the credit shall be
allowed to such person, but only if the person clearly
discloses to the entity in any sale or lease document the
specific amount of any credit otherwise allowable to the entity
under this section.
``(8) Recapture.--The Secretary shall, by regulations,
provide for recapturing the benefit of any credit allowable
under subsection (a) with respect to any property which ceases
to be property eligible for such credit (including recapture in
the case of a lease period of less than the economic life of a
vehicle).
``(9) Property used outside united states, etc., not
qualified.--No credit shall be allowed under subsection (a)
with respect to any property referred to in section 50(b) or
with respect to the portion of the cost of any property taken
into account under section 179.
``(10) Election to not take credit.--No credit shall be
allowed under subsection (a) for any vehicle if the taxpayer
elects to not have this section apply to such vehicle.
``(11) Carryforward allowed.--
``(A) In general.--If the credit amount allowable
under subsection (a) for a taxable year exceeds the
amount of the limitation under subsection (d) for such
taxable year (referred to as the `unused credit year'
in this paragraph), such excess shall be allowed as a
credit carryforward for each of the 20 taxable years
following the unused credit year.
``(B) Rules.--Rules similar to the rules of section
39 shall apply with respect to the credit carryforward
under subparagraph (A).
``(12) Interaction with air quality and motor vehicle
safety standards.--Unless otherwise provided in this section, a
motor vehicle shall not be considered eligible for a credit
under this section unless such vehicle is in compliance with--
``(A) the applicable provisions of the Clean Air
Act for the applicable make and model year of the
vehicle (or applicable air quality provisions of State
law in the case of a State which has adopted such
provision under a waiver under section 209(b) of the Clean Air Act),
and
``(B) the motor vehicle safety provisions of
sections 30101 through 30169 of title 49, United States
Code.
``(f) Regulations.--
``(1) In general.--The Secretary shall promulgate such
regulations as necessary to carry out the provisions of this
section.
``(2) Determination of motor vehicle eligibility.--The
Secretary, in coordination with the Secretary of Transportation
and the Administrator of the Environmental Protection Agency,
shall prescribe such regulations as necessary to determine
whether a motor vehicle meets the requirements to be eligible
for a credit under this section.
``(g) Termination.--This section shall not apply to any property
placed in service after--
``(1) in the case of a new qualified fuel cell motor
vehicle (as described in subsection (b)), December 31, 2012,
and
``(2) in the case of any other property, December 31,
2006.''.
(b) Conforming Amendments.--
(1) Section 1016(a) is amended by striking ``and'' at the
end of paragraph (30), by striking the period at the end of
paragraph (31) and inserting ``, and'', and by adding at the
end the following:
``(32) to the extent provided in section 30B(e)(5).''.
(2) Section 6501(m) is amended by inserting ``30B(e)(10),''
after ``30(d)(4),''.
(3) The table of sections for subpart B of part IV of
subchapter A of chapter 1 is amended by inserting after the
item relating to section 30A the following:
``Sec. 30B. Alternative motor vehicle
credit.''.
(c) Effective Date.--The amendments made by this section shall
apply to property placed in service after December 31, 2003, in taxable
years ending after such date.
TITLE II--RELIABILITY
SEC. 201. NATURAL GAS GATHERING LINES TREATED AS 7-YEAR PROPERTY.
(a) In General.--Subparagraph (C) of section 168(e)(3) (relating to
classification of certain property) is amended by striking ``and'' at
the end of clause (i), by redesignating clause (ii) as clause (iii),
and by inserting after clause (i) the following new clause:
``(ii) any natural gas gathering line,
and''.
(b) Natural Gas Gathering Line.--Subsection (i) of section 168 is
amended by adding after paragraph (15) the following new paragraph:
``(16) Natural gas gathering line.--The term `natural gas
gathering line' means--
``(A) the pipe, equipment, and appurtenances
determined to be a gathering line by the Federal Energy
Regulatory Commission, or
``(B) the pipe, equipment, and appurtenances used
to deliver natural gas from the wellhead or a
commonpoint to the point at which such gas first
reaches--
``(i) a gas processing plant,
``(ii) an interconnection with a
transmission pipeline certificated by the
Federal Energy Regulatory Commission as an
interstate transmission pipeline,
``(iii) an interconnection with an
intrastate transmission pipeline, or
``(iv) a direct interconnection with a
local distribution company, a gas storage
facility, or an industrial consumer.''.
(c) Alternative System.--The table contained in section
168(g)(3)(B) is amended by inserting after the item relating to
subparagraph (C)(i) the following:
``(C)(ii)...................................................... 10''.
(d) Alternative Minimum Tax Exception.--Subparagraph (B) of section
56(a)(1) is amended by inserting before the period the following: ``,
or in section 168(e)(3)(C)(ii)''.
(e) Effective Date.--The amendments made by this section shall
apply to property placed in service after the date of the enactment of
this Act, in taxable years ending after such date.
SEC. 202. NATURAL GAS DISTRIBUTION LINES TREATED AS 15-YEAR PROPERTY.
(a) In General.--Subparagraph (E) of section 168(e)(3) (relating to
classification of certain property) is amended by striking ``and'' at
the end of clause (ii), by striking the period at the end of clause
(iii) and by inserting ``, and'', and by adding at the end the
following new clause:
``(iv) any natural gas distribution
line.''.
(b) Alternative System.--The table contained in section
168(g)(3)(B) is amended by inserting after the item relating to
subparagraph (E)(iii) the following:
``(E)(iv)...................................................... 20''.
(c) Alternative Minimum Tax Exception.--Subparagraph (B) of section
56(a)(1) is amended by inserting before the period the following: ``,
or in section 168(e)(3)(E)(iv)''.
(d) Effective Date.--The amendments made by this section shall
apply to property placed in service after the date of the enactment of
this Act, in taxable years ending after such date.
SEC. 203. ELECTRIC TRANSMISSION PROPERTY TREATED AS 15-YEAR PROPERTY.
(a) In General.--Subparagraph (E) of section 168(e)(3) (relating to
classification of certain property) is amended by striking ``and'' at
the end of clause (iii), by striking the period at the end of clause
(iv) and by inserting ``, and'', and by adding at the end the following
new clause:
``(v) any section 1245 property (as defined
in section 1245(a)(3)) used in the transmission
at 69 or more kilovolts of electricity for
sale.''.
(b) Alternative System.--The table contained in section
168(g)(3)(B) is amended by inserting after the item relating to
subparagraph (E)(iv) the following:
``(E)(v)....................................................... 20''.
(c) Alternative Minimum Tax Exception.--Subparagraph (B) of section
56(a)(1) is amended by inserting before the period the following: ``,
or in section 168(e)(3)(E)(v)''.
(d) Effective Date.--The amendments made by this section shall
apply to property placed in service after the date of the enactment of
this Act, in taxable years ending after such date.
SEC. 204. EXPENSING OF CAPITAL COSTS INCURRED IN COMPLYING WITH
ENVIRONMENTAL PROTECTION AGENCY SULFUR REGULATIONS.
(a) In General.--Part VI of subchapter B of chapter 1 (relating to
itemized deductions for individuals and corporations) is amended by
inserting after section 179A the following new section:
``SEC. 179B. DEDUCTION FOR CAPITAL COSTS INCURRED IN COMPLYING WITH
ENVIRONMENTAL PROTECTION AGENCY SULFUR REGULATIONS.
``(a) Treatment as Expenses.--A small business refiner (as defined
in section 45H(c)(1)) may elect to treat 75 percent of qualified
capital costs (as defined in section 45H(c)(2)) which are paid or
incurred by the taxpayer during the taxable year as expenses which are
not chargeable to capital account. Any cost so treated shall be allowed
as a deduction for the taxable year in which paid or incurred.
``(b) Reduced Percentage.--In the case of a small business refiner
with average daily domestic refinery runs for the 1-year period ending
on March 31, 2003, in excess of 155,000 barrels, the number of
percentage points described in subsection (a) shall be reduced (not
below zero) by the product of such number (before the application of
this subsection) and the ratio of such excess to 50,000 barrels.
``(c) Basis Reduction.--
``(1) In general.--For purposes of this title, the basis of
any property shall be reduced by the portion of the cost of
such property taken into account under subsection (a).
``(2) Ordinary income recapture.--For purposes of section
1245, the amount of the deduction allowable under subsection
(a) with respect to any property which is of a character
subject to the allowance for depreciation shall be treated as a
deduction allowed for depreciation under section 167.''.
(b) Conforming Amendments.--
(1) Section 263(a)(1) is amended by striking ``or'' at the
end of subparagraph (G), by striking the period at the end of
subparagraph (H) and inserting ``; or'', and by adding at the
end the following new subparagraph:
``(I) expenditures for which a deduction is allowed
under section 179B.''.
(2) Section 312(k)(3)(B) is amended--
(A) by striking ``section 179 or 179A'' each place
it appears and inserting ``section 179, 179A, or
179B'', and
(B) in the heading, by striking ``179 or 179A'' and
inserting ``179, 179A, or 179B''.
(3) Section 1016(a) is amended by striking ``and'' at the
end of paragraph (31), by striking the period at the end of
paragraph (32) and inserting ``, and'', and by adding at the
end the following new paragraph:
``(33) to the extent provided in section 179B(c).''.
(4) Paragraphs (2)(C) and (3)(C) of section 1245(a) are
each amended by inserting ``179B,'' after ``179A,''.
(5) The table of sections for part VI of subchapter B of
chapter 1 is amended by inserting after the item relating to
section 179A the following new item:
``Sec. 179B. Deduction for capital costs
incurred in complying with
Environmental Protection Agency
sulfur regulations.''.
(c) Effective Date.--The amendment made by this section shall apply
to expenses paid or incurred after March 31, 2003, in taxable years
ending after such date.
SEC. 205. CREDIT FOR PRODUCTION OF LOW SULFUR DIESEL FUEL.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(relating to business-related credits) is amended by adding at the end
the following new section:
``SEC. 45H. CREDIT FOR PRODUCTION OF LOW SULFUR DIESEL FUEL.
``(a) In General.--For purposes of section 38, the amount of the
low sulfur diesel fuel production credit determined under this section
with respect to any facility of a small business refiner is an amount
equal to 5 cents for each gallon of low sulfur diesel fuel produced
during the taxable year by such small business refiner at such
facility.
``(b) Maximum Credit.--
``(1) In general.--The aggregate credit determined under
subsection (a) for any taxable year with respect to any
facility shall not exceed--
``(A) 25 percent of the qualified capital costs
incurred by the small business refiner with respect to
such facility, reduced by
``(B) the aggregate credits determined under this
section for all prior taxable years with respect to
such facility.
``(2) Reduced percentage.--In the case of a small business
refiner with average daily domestic refinery runs for the 1-
year period ending on March 31, 2003, in excess of 155,000
barrels, the number of percentage points described in paragraph
(1) shall be reduced (not below zero) by the product of such
number (before the application of this paragraph) and the ratio
of such excess to 50,000 barrels.
``(c) Definitions.--For purposes of this section--
``(1) Small business refiner.--The term `small business
refiner' means, with respect to any taxable year, a refiner of
crude oil with respect to which not more than 1,500 persons are
engaged in the refinery operations of the business on any day
during such taxable year and whose average daily domestic
refinery run for the 1-year period ending on March 31, 2003,
did not exceed 205,000 barrels.
``(2) Qualified capital costs.--The term `qualified capital
costs' means, with respect to any facility, those costs paid or
incurred during the applicable period for compliance with the
applicable EPA regulations with respect to such facility,
including expenditures for the construction of new process
operation units or the dismantling and reconstruction of
existing process units to be used in the production of low
sulfur diesel fuel, associated adjacent or offsite equipment
(including tankage, catalyst, and power supply), engineering,
construction period interest, and sitework.
``(3) Applicable epa regulations.--The term `applicable EPA
regulations' means the Highway Diesel Fuel Sulfur Control
Requirements of the Environmental Protection Agency.
``(4) Applicable period.--The term `applicable period'
means, with respect to any facility, the period beginning on
April 1, 2003, and ending with the date which is 1 year after
the date on which the taxpayer must comply with the applicable
EPA regulations with respect to such facility.
``(5) Low sulfur diesel fuel.--The term `low sulfur diesel
fuel' means diesel fuel with a sulfur content of 15 parts per
million or less.
``(d) Reduction in Basis.--For purposes of this subtitle, if a
credit is determined under this section for any expenditure with
respect to any property, the increase in basis of such property which
would (but for this subsection) result from such expenditure shall be
reduced by the amount of the credit so determined.
``(e) Certification.--
``(1) Required.--Not later than the date which is 30 months
after the first day of the first taxable year in which the low
sulfur diesel fuel production credit is allowed with respect to
a facility, the small business refiner must obtain
certification from the Secretary, in consultation with the
Administrator of the Environmental Protection Agency, that the
taxpayer's qualified capital costs with respect to such
facility will result in compliance with the applicable EPA
regulations.
``(2) Contents of application.--An application for
certification shall include relevant information regarding unit
capacities and operating characteristics sufficient for the
Secretary, in consultation with the Administrator of the
Environmental Protection Agency, to determine that such
qualified capital costs are necessary for compliance with the
applicable EPA regulations.
``(3) Review period.--Any application shall be reviewed and
notice of certification, if applicable, shall be made within 60
days of receipt of such application.
``(4) Statute of limitations.--With respect to the credit
allowed under this section--
``(A) the statutory period for the assessment of
any deficiency attributable to such credit shall not
expire before the end of the 3-year period ending on
the date that the review period described in paragraph
(3) ends, and
``(B) such deficiency may be assessed before the
expiration of such 3-year period notwithstanding the
provisions of any other law or rule of law which would
otherwise prevent such assessment.
``(f) Controlled Groups.--For purposes of this section, all persons
treated as a single employer under subsection (b), (c), (m), or (o) of
section 414 shall be treated as 1 taxpayer.''.
(b) Credit Made Part of General Business Credit.--Subsection (b) of
section 38 (relating to general business credit) is amended by striking
``plus'' at the end of paragraph (15), by striking the period at the
end of paragraph (16) and inserting ``, plus'', and by adding at the
end the following new paragraph:
``(17) in the case of a small business refiner, the low
sulfur diesel fuel production credit determined under section
45H(a).''.
(c) Denial of Double Benefit.--Section 280C (relating to certain
expenses for which credits are allowable) is amended by adding after
subsection (d) the following new subsection:
``(e) Low Sulfur Diesel Fuel Production Credit.--No deduction shall
be allowed for that portion of the expenses otherwise allowable as a
deduction for the taxable year which is equal to the amount of the
credit determined for the taxable year under section 45H(a).''.
(d) Basis Adjustment.--Section 1016(a) (relating to adjustments to
basis) is amended by striking ``and'' at the end of paragraph (32), by
striking the period at the end of paragraph (33) and inserting ``,
and'', and by adding at the end the following new paragraph:
``(34) in the case of a facility with respect to which a
credit was allowed under section 45H, to the extent provided in
section 45H(d).''.
(e) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 is amended by adding at the end
the following new item:
``Sec. 45H. Credit for production of low
sulfur diesel fuel.''.
(f) Effective Date.--The amendments made by this section shall
apply to expenses paid or incurred after March 31, 2003, in taxable
years ending after such date.
SEC. 206. DETERMINATION OF SMALL REFINER EXCEPTION TO OIL DEPLETION
DEDUCTION.
(a) In General.--Paragraph (4) of section 613A(d) (relating to
certain refiners excluded) is amended to read as follows:
``(4) Certain refiners excluded.--If the taxpayer or a
related person engages in the refining of crude oil, subsection
(c) shall not apply to the taxpayer for a taxable year if the
average daily refinery runs of the taxpayer and the related
person for the taxable year exceed 75,000 barrels. For purposes
of this paragraph, the average daily refinery runs for any
taxable year shall be determined by dividing the aggregate
refinery runs for the taxable year by the number of days in the
taxable year.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2003.
SEC. 207. SALES OR DISPOSITIONS TO IMPLEMENT FEDERAL ENERGY REGULATORY
COMMISSION OR STATE ELECTRIC RESTRUCTURING POLICY.
(a) In General.--Section 451 (relating to general rule for taxable
year of inclusion) is amended by adding at the end the following new
subsection:
``(i) Special Rule for Sales or Dispositions To Implement Federal
Energy Regulatory Commission or State Electric Restructuring Policy.--
``(1) In general.--In the case of any qualifying electric
transmission transaction to which the taxpayer elects the
application of this section, qualified gain from such
transaction shall be recognized--
``(A) in the taxable year which includes the date
of such transaction to the extent the amount realized
from such transaction exceeds--
``(i) the cost of exempt utility property
which is purchased by the taxpayer during the
4-year period beginning on such date, reduced (but not below zero) by
``(ii) any portion of such cost previously
taken into account under this subsection, and
``(B) ratably over the 8-taxable year period
beginning with the taxable year which includes the date
of such transaction, in the case of any such gain not
recognized under subparagraph (A).
``(2) Qualified gain.--For purposes of this subsection, the
term `qualified gain' means, with respect to any qualifying
electric transmission transaction in any taxable year--
``(A) any ordinary income derived from such
transaction which would be required to be recognized
under section 1245 or 1250 for such taxable year
(determined without regard to this subsection), and
``(B) any income derived from such transaction in
excess of the amount described in subparagraph (A)
which is required to be included in gross income for
such taxable year (determined without regard to this
subsection).
``(3) Qualifying electric transmission transaction.--For
purposes of this subsection, the term `qualifying electric
transmission transaction' means any sale or other disposition
before January 1, 2007, of--
``(A) property used in the trade or business of
providing electric transmission services, or
``(B) any stock or partnership interest in a
corporation or partnership, as the case may be, whose
principal trade or business consists of providing
electric transmission services,
but only if such sale or disposition is to an independent
transmission company.
``(4) Independent transmission company.--For purposes of
this subsection, the term `independent transmission company'
means--
``(A) an independent transmission provider approved
by the Federal Energy Regulatory Commission,
``(B) a person--
``(i) who the Federal Energy Regulatory
Commission determines in its authorization of
the transaction under section 203 of the
Federal Power Act (16 U.S.C. 824b) or by
declaratory order is not a market participant
within the meaning of such Commission's rules
applicable to independent transmission
providers, and
``(ii) whose transmission facilities to
which the election under this subsection
applies are under the operational control of a
Federal Energy Regulatory Commission-approved
independent transmission provider before the
close of the period specified in such
authorization, but not later than the close of
the period applicable under subsection
(a)(2)(B) as extended under paragraph (2), or
``(C) in the case of facilities subject to the
jurisdiction of the Public Utility Commission of
Texas--
``(i) a person which is approved by that
Commission as consistent with Texas State law
regarding an independent transmission provider,
or
``(ii) a political subdivision or affiliate
thereof whose transmission facilities are under
the operational control of a person described
in clause (i).
``(5) Exempt utility property.--For purposes of this
subsection--
``(A) In general.--The term `exempt utility
property' means property used in the trade or business
of--
``(i) generating, transmitting,
distributing, or selling electricity, or
``(ii) producing, transmitting,
distributing, or selling natural gas.
``(B) Nonrecognition of gain by reason of
acquisition of stock.--Acquisition of control of a
corporation shall be taken into account under this
subsection with respect to a qualifying electric
transmission transaction only if the principal trade or
business of such corporation is a trade or business
referred to in subparagraph (A).
``(6) Special rule for consolidated groups.--In the case of
a corporation which is a member of an affiliated group filing a
consolidated return, any exempt utility property purchased by
another member of such group shall be treated as purchased by
such corporation for purposes of applying paragraph (1)(A).
``(7) Time for assessment of deficiencies.--If the taxpayer
has made the election under paragraph (1) and any gain is
recognized by such taxpayer as provided in paragraph (1)(B),
then--
``(A) the statutory period for the assessment of
any deficiency, for any taxable year in which any part
of the gain on the transaction is realized,
attributable to such gain shall not expire prior to the
expiration of 3 years from the date the Secretary is
notified by the taxpayer (in such manner as the
Secretary may by regulations prescribe) of the purchase
of exempt utility property or of an intention not to
purchase such property, and
``(B) such deficiency may be assessed before the
expiration of such 3-year period notwithstanding any
law or rule of law which would otherwise prevent such
assessment.
``(8) Purchase.--For purposes of this subsection, the
taxpayer shall be considered to have purchased any property if
the unadjusted basis of such property is its cost within the
meaning of section 1012.
``(9) Election.--An election under paragraph (1) shall be
made at such time and in such manner as the Secretary may
require and, once made, shall be irrevocable.''.
(b) Effective Date.--The amendments made by this section shall
apply to transactions occurring after the date of the enactment of this
Act, in taxable years ending after such date.
SEC. 208. MODIFICATIONS TO SPECIAL RULES FOR NUCLEAR DECOMMISSIONING
COSTS.
(a) Repeal of Limitation on Deposits Into Fund Based on Cost of
Service; Contributions After Funding Period.--Subsection (b) of section
468A is amended to read as follows:
``(b) Limitation on Amounts Paid Into Fund.--
``(1) In general.--The amount which a taxpayer may pay into
the Fund for any taxable year shall not exceed the ruling
amount applicable to such taxable year.
``(2) Contributions after funding period.--Notwithstanding
any other provision of this section, a taxpayer may pay into
the Fund in any taxable year after the last taxable year to
which the ruling amount applies. Payments may not be made under
the preceding sentence to the extent such payments would cause
the assets of the Fund to exceed the nuclear decommissioning
costs allocable to the taxpayer's current or former interest in
the nuclear power plant to which the Fund relates. The
limitation under the preceding sentence shall be determined by
taking into account a reasonable rate of inflation for the
nuclear decommissioning costs and a reasonable after-tax rate
of return on the assets of the Fund until such assets are
anticipated to be expended.''.
(b) Clarification of Treatment of Fund Transfers.--Subsection (e)
of section 468A is amended by adding at the end the following new
paragraph:
``(8) Treatment of fund transfers.--If, in connection with
the transfer of the taxpayer's interest in a nuclear power
plant, the taxpayer transfers the Fund with respect to such
power plant to the transferee of such interest and the
transferee elects to continue the application of this section
to such Fund--
``(A) the transfer of such Fund shall not cause
such Fund to be disqualified from the application of
this section, and
``(B) no amount shall be treated as distributed
from such Fund, or be includible in gross income, by
reason of such transfer.''.
(c) Treatment of Certain Decommissioning Costs.--
(1) In general.--Section 468A is amended by redesignating
subsections (f) and (g) as subsections (g) and (h),
respectively, and by inserting after subsection (e) the
following new subsection:
``(f) Transfers Into Qualified Funds.--
``(1) In general.--Notwithstanding subsection (b), any
taxpayer maintaining a Fund to which this section applies with
respect to a nuclear power plant may transfer into such Fund up
to an amount equal to the excess of the total nuclear
decommissioning costs with respect to such nuclear power plant
over the portion of such costs taken into account in
determining the ruling amount in effect immediately before the
transfer.
``(2) Deduction for amounts transferred.--
``(A) In general.--Except as provided in
subparagraph (C), the deduction allowed by subsection
(a) for any transfer permitted by this subsection shall
be allowed ratably over the remaining estimated useful
life (within the meaning of subsection (d)(2)(A)) of
the nuclear power plant beginning with the taxable year
during which the transfer is made.
``(B) Denial of deduction for previously deducted
amounts.--No deduction shall be allowed for any
transfer under this subsection of an amount for which a
deduction was previously allowed or a corresponding
amount was not included in gross income. For purposes
of the preceding sentence, a ratable portion of each
transfer shall be treated as being from previously
deducted or excluded amounts to the extent thereof.
``(C) Transfers of qualified funds.--If--
``(i) any transfer permitted by this
subsection is made to any Fund to which this
section applies, and
``(ii) such Fund is transferred thereafter,
any deduction under this subsection for taxable years
ending after the date that such Fund is transferred
shall be allowed to the transferor for the taxable year
which includes such date.
``(D) Special rules.--
``(i) Gain or loss not recognized.--No gain
or loss shall be recognized on any transfer
permitted by this subsection.
``(ii) Transfers of appreciated property.--
If appreciated property is transferred in a
transfer permitted by this subsection, the
amount of the deduction shall be the adjusted
basis of such property.
``(3) New ruling amount required.--Paragraph (1) shall not
apply to any transfer unless the taxpayer requests from the
Secretary a new schedule of ruling amounts in connection with
such transfer.
``(4) No basis in qualified funds.--Notwithstanding any
other provision of law, the taxpayer's basis in any Fund to
which this section applies shall not be increased by reason of
any transfer permitted by this subsection.''.
(2) New ruling amount to take into account total costs.--
Subparagraph (A) of section 468A(d)(2) is amended to read as
follows:
``(A) fund the total nuclear decommissioning costs
with respect to such power plant over the estimated
useful life of such power plant, and''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2003.
SEC. 209. TREATMENT OF CERTAIN INCOME OF COOPERATIVES.
(a) Income From Open Access and Nuclear Decommissioning
Transactions.--
(1) In general.--Subparagraph (C) of section 501(c)(12) is
amended by striking ``or'' at the end of clause (i), by
striking clause (ii), and by adding at the end the following
new clauses:
``(ii) from any provision or sale of
transmission service or ancillary services if
such services are provided on a
nondiscriminatory open access basis under an
independent transmission provider agreement
approved by FERC (other than income received or
accrued directly or indirectly from a member),
``(iii) from any nuclear decommissioning
transaction, or
``(iv) from any asset exchange or
conversion transaction.''.
(2) Definitions and special rules.--Paragraph (12) of
section 501(c) is amended by adding at the end the following
new subparagraphs:
``(E) For purposes of subparagraph (C)(ii), the
term `FERC' means the Federal Energy Regulatory
Commission and references to such term shall be treated
as including the Public Utility Commission of Texas
with respect to any ERCOT utility (as defined in
section 212(k)(2)(B) of the Federal Power Act (16
U.S.C. 824k(k)(2)(B))).
``(F) For purposes of subparagraph (C)(iii), the
term `nuclear decommissioning transaction' means--
``(i) any transfer into a trust, fund, or
instrument established to pay any nuclear
decommissioning costs if the transfer is in
connection with the transfer of the mutual or
cooperative electric company's interest in a
nuclear power plant or nuclear power plant
unit,
``(ii) any distribution from any trust,
fund, or instrument established to pay any
nuclear decommissioning costs, or
``(iii) any earnings from any trust, fund,
or instrument established to pay any nuclear
decommissioning costs.
``(G) For purposes of subparagraph (C)(iv), the
term `asset exchange or conversion transaction' means
any voluntary exchange or involuntary conversion of any
property related to generating, transmitting,
distributing, or selling electric energy by a mutual or
cooperative electric company, the gain from which
qualifies for deferred recognition under section 1031
or 1033, but only if the replacement property acquired
by such company pursuant to such section constitutes
property which is used, or to be used, for--
``(i) generating, transmitting,
distributing, or selling electric energy, or
``(ii) producing, transmitting,
distributing, or selling natural gas.''.
(b) Treatment of Income From Load Loss Transactions, etc.--
Paragraph (12) of section 501(c), as amended by subsection (a)(2), is
amended by adding after subparagraph (G) the following new
subparagraph:
``(H)(i) In the case of a mutual or cooperative
electric company described in this paragraph or an
organization described in section 1381(a)(2)(C), income
received or accrued from a load loss transaction shall
be treated as an amount collected from members for the
sole purpose of meeting losses and expenses.
``(ii) For purposes of clause (i), the term `load
loss transaction' means any wholesale or retail sale of
electric energy (other than to members) to the extent
that the aggregate sales during the recovery period do
not exceed the load loss mitigation sales limit for
such period.
``(iii) For purposes of clause (ii), the load loss
mitigation sales limit for the recovery period is the
sum of the annual load losses for each year of such
period.
``(iv) For purposes of clause (iii), a mutual or
cooperative electric company's annual load loss for
each year of the recovery period is the amount (if any)
by which--
``(I) the megawatt hours of electric energy
sold during such year to members of such
electric company are less than
``(II) the megawatt hours of electric
energy sold during the base year to such
members.
``(v) For purposes of clause (iv)(II), the term
`base year' means--
``(I) the calendar year preceding the
start-up year, or
``(II) at the election of the electric
company, the second or third calendar years
preceding the start-up year.
``(vi) For purposes of this subparagraph, the
recovery period is the 7-year period beginning with the
start-up year.
``(vii) For purposes of this subparagraph, the
start-up year is the calendar year which includes the
date of the enactment of this subparagraph or, if
later, at the election of the mutual or cooperative
electric company--
``(I) the first year that such electric
company offers nondiscriminatory open access,
or
``(II) the first year in which at least 10
percent of such electric company's sales are
not to members of such electric company.
``(viii) A company shall not fail to be treated as
a mutual or cooperative company for purposes of this
paragraph or as a corporation operating on a
cooperative basis for purposes of section 1381(a)(2)(C)
by reason of the treatment under clause (i).
``(ix) For purposes of subparagraph (A), in the
case of a mutual or cooperative electric company,
income received, or accrued, indirectly from a member
shall be treated as an amount collected from members
for the sole purpose of meeting losses and expenses.''.
(c) Exception From Unrelated Business Taxable Income.--Subsection
(b) of section 512 (relating to modifications) is amended by adding at
the end the following new paragraph:
``(18) Treatment of mutual or cooperative electric
companies.--In the case of a mutual or cooperative electric
company described in section 501(c)(12), there shall be
excluded income which is treated as member income under
subparagraph (H) thereof.''.
(d) Cross Reference.--Section 1381 is amended by adding at the end
the following new subsection:
``(c) Cross Reference.--
``For treatment of income from load
loss transactions of organizations described in subsection (a)(2)(C),
see section 501(c)(12)(H).''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 210. ARBITRAGE RULES NOT TO APPLY TO PREPAYMENTS FOR NATURAL GAS.
(a) In General.--Subsection (b) of section 148 (relating to higher
yielding investments) is amended by adding at the end the following new
paragraph:
``(4) Safe harbor for prepaid natural gas.--
``(A) In general.--The term `investment-type
property' does not include a prepayment under a
qualified natural gas supply contract.
``(B) Qualified natural gas supply contract.--For
purposes of this paragraph, the term `qualified natural
gas supply contract' means any contract to acquire
natural gas for resale by a utility owned by a
governmental unit if the amount of gas permitted to be
acquired under the contract by the utility during any
year does not exceed the sum of--
``(i) the annual average amount during the
testing period of natural gas purchased (other
than for resale) by customers of such utility
who are located within the service area of such
utility, and
``(ii) the amount of natural gas to be used
to transport the prepaid natural gas to the
utility during such year.
``(C) Natural gas used to generate electricity.--
Natural gas used to generate electricity shall be taken
into account in determining the average under
subparagraph (B)(i)--
``(i) only if the electricity is generated
by a utility owned by a governmental unit, and
``(ii) only to the extent that the
electricity is sold (other than for resale) to
customers of such utility who are located
within the service area of such utility.
``(D) Adjustments for changes in customer base.--
``(i) New business customers.--If--
``(I) after the close of the
testing period and before the date of
issuance of the issue, the utility
owned by a governmental unit enters
into a contract to supply natural gas
(other than for resale) for a business
use at a property within the service
area of such utility, and
``(II) the utility did not supply
natural gas to such property during the
testing period or the ratable amount of natural gas to be supplied
under the contract is significantly greater than the ratable amount of
gas supplied to such property during the testing period,
then a contract shall not fail to be treated as
a qualified natural gas supply contract by
reason of supplying the additional natural gas
under the contract referred to in subclause
(I).
``(ii) Lost customers.--The average under
subparagraph (B)(i) shall not exceed the annual
amount of natural gas reasonably expected to be
purchased (other than for resale) by persons
who are located within the service area of such
utility and who, as of the date of issuance of
the issue, are customers of such utility.
``(E) Ruling requests.--The Secretary may increase
the average under subparagraph (B)(i) for any period if
the utility owned by the governmental unit establishes
to the satisfaction of the Secretary that, based on
objective evidence of growth in natural gas consumption
or population, such average would otherwise be
insufficient for such period.
``(F) Adjustment for natural gas otherwise on
hand.--
``(i) In general.--The amount otherwise
permitted to be acquired under the contract for
any period shall be reduced by--
``(I) the applicable share of
natural gas held by the utility on the
date of issuance of the issue, and
``(II) the natural gas (not taken
into account under subclause (I)) which
the utility has a right to acquire
during such period (determined as of
the date of issuance of the issue).
``(ii) Applicable share.--For purposes of
the clause (i), the term `applicable share'
means, with respect to any period, the natural
gas allocable to such period if the gas were
allocated ratably over the period to which the
prepayment relates.
``(G) Intentional acts.--Subparagraph (A) shall
cease to apply to any issue if the utility owned by the
governmental unit engages in any intentional act to
render the volume of natural gas acquired by such
prepayment to be in excess of the sum of--
``(i) the amount of natural gas needed
(other than for resale) by customers of such
utility who are located within the service area
of such utility, and
``(ii) the amount of natural gas used to
transport such natural gas to the utility.
``(H) Testing period.--For purposes of this
paragraph, the term `testing period' means, with
respect to an issue, the most recent 5 calendar years
ending before the date of issuance of the issue.
``(I) Service area.--For purposes of this
paragraph, the service area of a utility owned by a
governmental unit shall be comprised of--
``(i) any area throughout which such
utility provided at all times during the
testing period--
``(I) in the case of a natural gas
utility, natural gas transmission or
distribution services, and
``(II) in the case of an electric
utility, electricity distribution
services,
``(ii) any area within a county contiguous
to the area described in clause (i) in which
retail customers of such utility are located if
such area is not also served by another utility
providing natural gas or electricity services,
as the case may be, and
``(iii) any area recognized as the service
area of such utility under State or Federal
law.''.
(b) Private Loan Financing Test Not To Apply to Prepayments for
Natural Gas.--Paragraph (2) of section 141(c) (providing exceptions to
the private loan financing test) is amended by striking ``or'' at the
end of subparagraph (A), by striking the period at the end of
subparagraph (B) and inserting ``, or'', and by adding at the end the
following new subparagraph:
``(C) is a qualified natural gas supply contract
(as defined in section 148(b)(4)).''.
(c) Effective Date.--The amendment made by this section shall apply
to obligations issued after the date of the enactment of this Act.
SEC. 211. PREPAYMENT OF PREMIUM LIABILITY FOR COAL INDUSTRY HEALTH
BENEFITS.
(a) In General.--Section 9704 (relating to liability of assigned
operators) is amended by adding at the end the following new
subsection:
``(j) Prepayment of Premium Liability.--
``(1) In general.--If--
``(A) any assigned operator who is a member of a
controlled group of corporations (within the meaning of
section 52(a)) makes a payment meeting the requirements
of paragraph (2) to the Combined Fund, and
``(B) the common parent of such group--
``(i) is jointly and severally liable for
any premium which would (but for this
subsection) be required to be paid by such
operator, and
``(ii) provides security which meets the
requirements of paragraph (3),
then no person (other than such common parent) shall be liable
for any premium for which such operator would otherwise be
liable.
``(2) Requirements.--A payment meets the requirements of
this paragraph if--
``(A) the amount of the payment is not less than
the present value of the total premium liability of the
assigned operator for its assignees under this chapter
with respect to the Combined Fund (as determined by the
operator's enrolled actuary, as defined in section
7701(a)(35)), using actuarial methods and assumptions
each of which is reasonable and which are reasonable in
the aggregate, as determined by such enrolled actuary,
``(B) a signed actuarial report is filed with the
Secretary of Labor by such enrolled actuary
containing--
``(i) the date of the actuarial valuation
applicable to the report, and
``(ii) a statement by the enrolled actuary
signing the report that to the best of the
actuary's knowledge the report is complete and
accurate and that in the actuary's opinion the
actuarial assumptions used are in the aggregate
reasonably related to the experience of the
operator and to reasonable expectations,
``(C) a description of the security described in
paragraph (3) is filed with the Secretary of Labor by
the common parent, and
``(D) 30 calendar days have elapsed after the
report required by subparagraph (B), and the
description required by subparagraph (C), are filed
with the Secretary of Labor, and the Secretary of Labor
has not notified the assigned operator in writing that
the requirements of this paragraph have not been
satisfied.
``(3) Security.--Security meets the requirements of this
paragraph if--
``(A) the security (in the form of a bond, letter
of credit, or cash escrow) is provided to the trustees
of the 1992 UMWA Benefit Plan, solely for the purpose
of paying premiums for beneficiaries described in
section 9712(b)(2)(B), equal in amount to one year's
liability of the assigned operator under section 9711,
determined by using the average cost of such operator's
liability during its prior 3 calendar years; and
``(B) the security will remain in place for 5
years.
``(4) Use of prepayment.--Any payment to which this
subsection applies (and earnings thereon) shall be used
exclusively to pay premiums which would (but for this
subsection) be required to be paid by the assigned operator
making such payment.''.
(b) Effective Date.--The amendment made by this section shall take
effect on the date of the enactment of this Act.
TITLE III--PRODUCTION
SEC. 301. OIL AND GAS FROM MARGINAL WELLS.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(relating to business credits) is amended by adding at the end the
following:
``SEC. 45I. CREDIT FOR PRODUCING OIL AND GAS FROM MARGINAL WELLS.
``(a) General Rule.--For purposes of section 38, the marginal well
production credit for any taxable year is an amount equal to the
product of--
``(1) the credit amount, and
``(2) the qualified credit oil production and the qualified
natural gas production which is attributable to the taxpayer.
``(b) Credit Amount.--For purposes of this section--
``(1) In general.--The credit amount is--
``(A) $3 per barrel of qualified crude oil
production, and
``(B) 50 cents per 1,000 cubic feet of qualified
natural gas production.
``(2) Reduction as oil and gas prices increase.--
``(A) In general.--The $3 and 50 cents amounts
under paragraph (1) shall each be reduced (but not
below zero) by an amount which bears the same ratio to
such amount (determined without regard to this
paragraph) as--
``(i) the excess (if any) of the applicable
reference price over $15 ($1.67 for qualified
natural gas production), bears to
``(ii) $3 ($0.33 for qualified natural gas
production).
The applicable reference price for a taxable year is
the reference price of the calendar year preceding the
calendar year in which the taxable year begins.
``(B) Inflation adjustment.--In the case of any
taxable year beginning in a calendar year after 2003,
each of the dollar amounts contained in subparagraph
(A) shall be increased to an amount equal to such
dollar amount multiplied by the inflation adjustment
factor for such calendar year (determined under section
43(b)(3)(B) by substituting `2002' for `1990').
``(C) Reference price.--For purposes of this
paragraph, the term `reference price' means, with
respect to any calendar year--
``(i) in the case of qualified crude oil
production, the reference price determined
under section 29(d)(2)(C), and
``(ii) in the case of qualified natural gas
production, the Secretary's estimate of the
annual average wellhead price per 1,000 cubic
feet for all domestic natural gas.
``(c) Qualified Crude Oil and Natural Gas Production.--For purposes
of this section--
``(1) In general.--The terms `qualified crude oil
production' and `qualified natural gas production' mean
domestic crude oil or natural gas which is produced from a
qualified marginal well.
``(2) Limitation on amount of production which may
qualify.--
``(A) In general.--Crude oil or natural gas
produced during any taxable year from any well shall
not be treated as qualified crude oil production or
qualified natural gas production to the extent
production from the well during the taxable year
exceeds 1,095 barrels or barrel equivalents.
``(B) Proportionate reductions.--
``(i) Short taxable years.--In the case of
a short taxable year, the limitations under
this paragraph shall be proportionately reduced
to reflect the ratio which the number of days
in such taxable year bears to 365.
``(ii) Wells not in production entire
year.--In the case of a well which is not
capable of production during each day of a
taxable year, the limitations under this
paragraph applicable to the well shall be
proportionately reduced to reflect the ratio
which the number of days of production bears to
the total number of days in the taxable year.
``(3) Definitions.--
``(A) Qualified marginal well.--The term `qualified
marginal well' means a domestic well--
``(i) the production from which during the
taxable year is treated as marginal production
under section 613A(c)(6), or
``(ii) which, during the taxable year--
``(I) has average daily production
of not more than 25 barrel equivalents,
and
``(II) produces water at a rate not
less than 95 percent of total well
effluent.
``(B) Crude oil, etc.--The terms `crude oil',
`natural gas', `domestic', and `barrel' have the
meanings given such terms by section 613A(e).
``(C) Barrel equivalent.--The term `barrel
equivalent' means, with respect to natural gas, a
conversion ratio of 6,000 cubic feet of natural gas to
1 barrel of crude oil.
``(d) Other Rules.--
``(1) Production attributable to the taxpayer.--In the case
of a qualified marginal well in which there is more than one
owner of operating interests in the well and the crude oil or
natural gas production exceeds the limitation under subsection
(c)(2), qualifying crude oil production or qualifying natural
gas production attributable to the taxpayer shall be determined
on the basis of the ratio which taxpayer's revenue interest in
the production bears to the aggregate of the revenue interests
of all operating interest owners in the production.
``(2) Operating interest required.--Any credit under this
section may be claimed only on production which is attributable
to the holder of an operating interest.
``(3) Production from nonconventional sources excluded.--In
the case of production from a qualified marginal well which is
eligible for the credit allowed under section 29 for the
taxable year, no credit shall be allowable under this section
unless the taxpayer elects not to claim the credit under
section 29 with respect to the well.''.
(b) Credit Treated as Business Credit.--Section 38(b) is amended by
striking ``plus'' at the end of paragraph (16), by striking the period
at the end of paragraph (17) and inserting ``, plus'', and by adding at
the end the following:
``(18) the marginal oil and gas well production credit
determined under section 45I(a).''.
(c) Carryback.--Subsection (a) of section 39 (relating to carryback
and carryforward of unused credits generally) is amended by adding at
the end the following:
``(3) 10-year carryback for marginal oil and gas well
production credit.--In the case of the marginal oil and gas
well production credit--
``(A) this section shall be applied separately from
the business credit (other than the marginal oil and
gas well production credit),
``(B) paragraph (1) shall be applied by
substituting `10 taxable years' for `1 taxable years'
in subparagraph (A) thereof, and
``(C) paragraph (2) shall be applied--
``(i) by substituting `31 taxable years'
for `21 taxable years' in subparagraph (A)
thereof, and
``(ii) by substituting `30 taxable years'
for `20 taxable years' in subparagraph (A)
thereof.''.
(d) Coordination With Section 29.--Section 29(a) is amended by
striking ``There'' and inserting ``At the election of the taxpayer,
there''.
(e) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 is amended by adding at the end
the following:
``Sec. 45I. Credit for producing oil and
gas from marginal wells.''.
(f) Effective Date.--The amendments made by this section shall
apply to production in taxable years beginning after December 31, 2003.
SEC. 302. TEMPORARY SUSPENSION OF LIMITATION BASED ON 65 PERCENT OF
TAXABLE INCOME AND EXTENSION OF SUSPENSION OF TAXABLE
INCOME LIMIT WITH RESPECT TO MARGINAL PRODUCTION.
(a) Limitation Based on 65 Percent of Taxable Income.--Subsection
(d) of section 613A (relating to limitation on percentage depletion in
case of oil and gas wells) is amended by adding at the end the
following new paragraph:
``(6) Temporary suspension of taxable income limit.--
Paragraph (1) shall not apply to taxable years beginning after
December 31, 2003, and before January 1, 2007, including with
respect to amounts carried under the second sentence of
paragraph (1) to such taxable years.''.
(b) Extension of Suspension of Taxable Income Limit With Respect to
Marginal Production.--Subparagraph (H) of section 613A(c)(6) (relating
to temporary suspension of taxable income limit with respect to
marginal production) is amended by striking ``2004'' and inserting
``2007''.
(c) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 2003.
SEC. 303. AMORTIZATION OF DELAY RENTAL PAYMENTS.
(a) In General.--Section 167 (relating to depreciation) is amended
by redesignating subsection (h) as subsection (i) and by inserting
after subsection (g) the following new subsection:
``(h) Amortization of Delay Rental Payments for Domestic Oil and
Gas Wells.--
``(1) In general.--Any delay rental payment paid or
incurred in connection with the development of oil or gas wells
within the United States (as defined in section 638) shall be
allowed as a deduction ratably over the 24-month period
beginning on the date that such payment was paid or incurred.
``(2) Half-year convention.--For purposes of paragraph (1),
any payment paid or incurred during the taxable year shall be
treated as paid or incurred on the mid-point of such taxable
year.
``(3) Exclusive method.--Except as provided in this
subsection, no depreciation or amortization deduction shall be
allowed with respect to such payments.
``(4) Treatment upon abandonment.--If any property to which
a delay rental payment relates is retired or abandoned during
the 24-month period described in paragraph (1), no deduction
shall be allowed on account of such retirement or abandonment
and the amortization deduction under this subsection shall
continue with respect to such payment.
``(5) Delay rental payments.--For purposes of this
subsection, the term `delay rental payment' means an amount
paid for the privilege of deferring development of an oil or
gas well under an oil or gas lease.''.
(b) Effective Date.--The amendment made by this section shall apply
to amounts paid or incurred in taxable years beginning after December
31, 2003.
SEC. 304. AMORTIZATION OF GEOLOGICAL AND GEOPHYSICAL EXPENDITURES.
(a) In General.--Section 167 (relating to depreciation) is amended
by redesignating subsection (i) as subsection (j) and by inserting
after subsection (h) the following new subsection:
``(i) Amortization of Geological and Geophysical Expenditures.--
``(1) In general.--Any geological and geophysical expenses
paid or incurred in connection with the exploration for, or
development of, oil or gas within the United States (as defined
in section 638) shall be allowed as a deduction ratably over
the 24-month period beginning on the date that such expense was
paid or incurred.
``(2) Special rules.--For purposes of this subsection,
rules similar to the rules of paragraphs (2), (3), and (4) of
subsection (h) shall apply.''.
(b) Effective Date.--The amendment made by this section shall apply
to costs paid or incurred in taxable years beginning after December 31,
2003.
SEC. 305. EXTENSION AND MODIFICATION OF CREDIT FOR PRODUCING FUEL FROM
A NONCONVENTIONAL SOURCE.
(a) In General.--Section 29 is amended by adding at the end the
following new subsection:
``(h) Extension for Other Facilities.--
``(1) Extension for oil and certain gas.--In the case of a
well for producing qualified fuels described in subparagraph
(A) or (B)(i) of subsection (c)(1)--
``(A) Application of credit for new wells.--
Notwithstanding subsection (f), this section shall
apply with respect to such fuels--
``(i) which are produced from a well
drilled after the date of the enactment of this
subsection and before January 1, 2007, and
``(ii) which are sold not later than the
close of the 4-year period beginning on the
date that such well is drilled, or, if earlier,
January 1, 2010.
``(B) Extension of credit for old wells.--
Subsection (f)(2) shall be applied by substituting
`2007' for `2003' with respect to wells described in
subsection (f)(1)(A) with respect to such fuels.
``(2) Extension for facilities producing qualified fuel
from landfill gas.--
``(A) In general.--In the case of a facility for
producing qualified fuel from landfill gas which was
placed in service after June 30, 1998, and before
January 1, 2007, this section shall apply to fuel
produced at such facility during the 5-year period
beginning on the later of--
``(i) the date such facility was placed in
service, or
``(ii) the date of the enactment of this
subsection.
``(B) Reduction of credit for certain landfill
facilities.--In the case of a facility to which
paragraph (1) applies and which is located at a
landfill which is required pursuant to section
60.751(b)(2) or section 60.33c of title 40, Code of
Federal Regulations (as in effect on April 3, 2003) to
install and operate a collection and control system which captures gas
generated within the landfill, subsection (a)(1) shall be applied to
gas so captured by substituting `$2' for `$3' for the taxable year
during which such system is required to be installed and operated.
``(3) Special rules.--In determining the amount of credit
allowable under this section solely by reason of this
subsection--
``(A) Daily limit.--The amount of qualified fuels
sold during any taxable year which may be taken into
account by reason of this subsection with respect to
any project shall not exceed an average barrel-of-oil
equivalent of 200,000 cubic feet of natural gas per
day. Days before the date the project is placed in
service shall not be taken into account in determining
such average.
``(B) Extension period to commence with unadjusted
credit amount.--In the case of fuels sold during 2003,
the dollar amount applicable under subsection (a)(1)
shall be $3 (without regard to subsection (b)(2)). In
the case of fuels sold after 2003, subparagraph (B) of
subsection (d)(2) shall be applied by substituting
`2003' for `1979'.''.
(b) Treatment as Business Credit.--
(1) Credit moved to subpart relating to business related
credits.--The Internal Revenue Code of 1986 is amended by
redesignating section 29 as section 45J and by moving section
45J (as so redesignated) from subpart B of part IV of
subchapter A of chapter 1 to the end of subpart D of part IV of
subchapter A of chapter 1.
(2) Credit treated as business credit.--Section 38(b) is
amended by striking ``plus'' at the end of paragraph (17), by
striking the period at the end of paragraph (18) and inserting
``, plus'', and by adding at the end the following:
``(19) the nonconventional source production credit
determined under section 45J(a).''.
(3) Conforming amendments.--
(A) Section 30(b)(2)(A), as redesignated by section
110(a), is amended by striking ``sections 27 and 29''
and inserting ``section 27''.
(B) Section 30B(d), as added by section 111, is
amended by striking ``, 29,''.
(C) Section 39(d) is amended by adding at the end
the following new paragraph:
``(13) No carryback for nonconventional source production
credit.--No portion of the unused business credit for any
taxable year which is attributable to the credit under section
45J may be carried back to a taxable year ending before April
1, 2003.''.
(D) Sections 43(b)(2), 45I(b)(2)(C) (as added by
section 301), and 613A(c)(6)(C) are each amended by
striking ``section 29(d)(2)(C)'' and inserting
``section 45J(d)(2)(C)''.
(E) Paragraph (9) of section 45(c), as added by
section 102(c), is amended by striking ``section 29''
and inserting ``section 45J'' and by striking ``section
29'' in the heading of such paragraph and inserting
``section 45J''.
(F) Section 45I(d)(3), as added by section 301, is
amended by striking ``section 29'' each place it
appears and inserting ``section 45J''.
(G) Section 45J(a), as amended by section 301(d)
and redesignated by paragraph (1), is amended by
striking ``At the election of the taxpayer, there shall
be allowed as a credit against the tax imposed by this
chapter for the taxable year'' and inserting ``For
purposes of section 38, if the taxpayer elects to have
this section apply, the nonconventional source
production credit determined under this section for the
taxable year is''.
(H) Section 45J(b), as so redesignated, is amended
by striking paragraph (6).
(I) Section 53(d)(1)(B)(iii) is amended by striking
``under section 29'' and all that follows through ``or
not allowed''.
(J) Section 55(c)(2) is amended by striking
``29(b)(6),''.
(K) Subsection (a) of section 772 is amended by
inserting ``and'' at the end of paragraph (9), by
striking paragraph (10), and by redesignating paragraph
(11) as paragraph (10).
(L) Paragraph (5) of section 772(d) is amended by
striking ``the foreign tax credit, and the credit
allowable under section 29'' and inserting ``and the
foreign tax credit''.
(M) The table of sections for subpart B of part IV
of subchapter A of chapter 1 is amended by striking the
item relating to section 29.
(N) The table of sections for subpart D of part IV
of subchapter A of chapter 1 is amended by inserting
after the item relating to section 45I the following
new item:
``Sec. 45J. Credit for producing fuel
from a nonconventional
source.''.
(c) Effective Dates.--
(1) In general.--The amendment made by subsection (a) shall
apply to fuel sold after March 31, 2003, in taxable years
ending after such date.
(2) Treatment as business credit.--The amendments made by
subsection (b) shall apply to taxable years ending after March
31, 2003.
SEC. 306. BUSINESS RELATED ENERGY CREDITS ALLOWED AGAINST REGULAR AND
MINIMUM TAX.
(a) In General.--Subsection (c) of section 38 (relating to
limitation based on amount of tax) is amended by redesignating
paragraph (4) as paragraph (5) and by inserting after paragraph (3) the
following new paragraph:
``(4) Special rules for specified energy credits.--
``(A) In general.--In the case of specified energy
credits--
``(i) this section and section 39 shall be
applied separately with respect to such
credits, and
``(ii) in applying paragraph (1) to such
credits--
``(I) the tentative minimum tax
shall be treated as being zero, and
``(II) the limitation under
paragraph (1) (as modified by subclause
(I)) shall be reduced by the credit
allowed under subsection (a) for the
taxable year (other than the specified
energy credits).
``(B) Specified energy credits.--For purposes of
this subsection, the term `specified energy credits'
means the credits determined under sections 45G, 45H,
and 45I.
``(C) Special rule for qualified wind facilities.--
For purposes of this subsection, the term `specified
energy credits' shall include the credit determined
under section 45 to the extent that such credit is
attributable to electricity produced--
``(i) at a facility using wind to produce
electricity which is originally placed in
service after the date of the enactment of this
paragraph, and
``(ii) during the 4-year period beginning
on the date that such facility was originally
placed in service.''.
(b) Conforming Amendments.--Paragraphs (2)(A)(ii)(II) and
(3)(A)(ii)(II) of section 38(c) are each amended by inserting ``or the
specified energy credits'' after ``employee credit''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years ending after the date of the enactment of this
Act.
SEC. 307. TEMPORARY REPEAL OF ALTERNATIVE MINIMUM TAX PREFERENCE FOR
INTANGIBLE DRILLING COSTS.
(a) In General.--Clause (ii) of section 57(a)(2)(E) is amended by
adding at the end the following new sentence: ``The preceding sentence
shall not apply to taxable years beginning after December 31, 2003, and
before January 1, 2006.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2003.
SEC. 308. ALLOWANCE OF ENHANCED RECOVERY CREDIT AGAINST THE ALTERNATIVE
MINIMUM TAX.
(a) In General.--Subparagraph (B) of section 38(c)(4), as amended
by section 306, is amended by adding at the end the following new
sentence: ``For taxable years beginning after December 31, 2003, and
before January 1, 2006, such term includes the credit determined under
section 43.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2003.
TITLE IV--CORPORATE EXPATRIATION
SEC. 401. TAX TREATMENT OF CORPORATE EXPATRIATION.
(a) In General.--Subchapter C of chapter 80 (relating to provisions
affecting more than one subtitle) is amended by adding at the end the
following new section:
``SEC. 7874. TAX TREATMENT OF CORPORATE EXPATRIATION.
``(a) Inverted Corporations Treated as Domestic Corporations.--
``(1) In general.--If a foreign incorporated entity is
treated as an inverted domestic corporation, then,
notwithstanding section 7701(a)(4), such entity shall be
treated for purposes of this title as a domestic corporation.
``(2) Inverted domestic corporation.--For purposes of this
section, a foreign incorporated entity shall be treated as an
inverted domestic corporation if, pursuant to a plan (or a
series of related transactions)--
``(A) the entity completes after March 4, 2003, the
direct or indirect acquisition of substantially all of
the properties held directly or indirectly by a
domestic corporation or substantially all of the
properties constituting a trade or business of a
domestic partnership,
``(B) after the acquisition at least 80 percent of
the stock (by vote or value) of the entity is held--
``(i) in the case of an acquisition with
respect to a domestic corporation, by former
shareholders of the domestic corporation by
reason of holding stock in the domestic
corporation, or
``(ii) in the case of an acquisition with
respect to a domestic partnership, by former
partners of the domestic partnership by reason
of holding a capital or profits interest in the
domestic partnership, and
``(C) the expanded affiliated group which after the
acquisition includes the entity does not have
substantial business activities in the foreign country
in which or under the law of which the entity is
created or organized when compared to the total
business activities of such expanded affiliated group.
``(3) Termination.--This subsection shall not apply to any
acquisition completed after December 31, 2004.
``(b) Definitions and Special Rules.--For purposes of this
section--
``(1) Foreign incorporated entity.--The term `foreign
incorporated entity' means any entity which is, or but for
subsection (a) would be, treated as a foreign corporation for
purposes of this title.
``(2) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group as defined in
section 1504(a) but without regard to paragraphs (2), (3), and
(4) of section 1504(b), except that section 1504(a) shall be
applied by substituting `more than 50 percent' for `at least 80
percent' each place it appears.
``(3) Certain stock disregarded.--There shall not be taken
into account in determining ownership under subsection
(a)(3)(B)--
``(A) stock held by members of the expanded
affiliated group which includes the foreign
incorporated entity, or
``(B) stock of such foreign incorporated entity
which is sold in a public offering related to the
acquisition described in subsection (a)(3)(A).
``(4) Plan deemed in certain cases.--If a foreign
incorporated entity acquires directly or indirectly
substantially all of the properties of a domestic corporation
or partnership during the 4-year period beginning on the date
which is 2 years before the ownership requirements of
subsection (a)(3)(B) are met, such actions shall be treated as
pursuant to a plan.
``(5) Certain transfers disregarded.--The transfer of
properties or liabilities (including by contribution or
distribution) shall be disregarded if such transfers are part
of a plan a principal purpose of which is to avoid the purposes
of this section.
``(6) Special rule for related partnerships.--For purposes
of applying subsection (a)(3)(B) to the acquisition of a
domestic partnership, except as provided in regulations, all
partnerships which are under common control (within the meaning
of section 482) shall be treated as 1 partnership.
``(7) Regulations.--The Secretary shall prescribe such
regulations as may be appropriate to determine whether a
corporation is an inverted domestic corporation, including
regulations--
``(A) to treat warrants, options, contracts to
acquire stock, convertible debt interests, and other
similar interests as stock, and
``(B) to treat stock as not stock.
``(c) Special Rule for Treaties.--Nothing in section 894 or 7852(d)
or in any other provision of law shall be construed as permitting an
exemption, by reason of any treaty obligation of the United States
heretofore or hereafter entered into, from the provisions of this
section.
``(d) Regulations.--The Secretary shall provide such regulations as
are necessary to carry out this section, including regulations
providing for such adjustments to the application of this section as
are necessary to prevent the avoidance of the purposes of this section,
including the avoidance of such purposes through--
``(1) the use of related persons, pass-through or other
noncorporate entities, or other intermediaries, or
``(2) transactions designed to have persons cease to be (or
not become) members of expanded affiliated groups or related
persons.''.
(b) Conforming Amendment.--The table of sections for subchapter C
of chapter 80 is amended by adding at the end the following new item:
``Sec. 7874. Tax treatment of corporate
expatriation.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years ending after March 4, 2003.
SEC. 402. EXPRESSING THE SENSE OF THE CONGRESS THAT TAX REFORM IS
NEEDED TO ADDRESS THE ISSUE OF CORPORATE EXPATRIATION.
(a) Findings.--The Congress finds that--
(1) the tax laws of the United States are overly complex;
(2) the tax laws of the United States are among the most
burdensome and uncompetitive in the world;
(3) the tax laws of the United States make it difficult for
domestically-owned United States companies to compete abroad
and in the United States;
(4) a domestically-owned corporation is disadvantaged
compared to a United States subsidiary of a foreign-owned
corporation; and
(5) international competitiveness is forcing many United
States corporations to make a choice they do not want to make--
go out of business, sell the business to a foreign competitor,
or become a subsidiary of a foreign corporation (i.e., engage
in an inversion transaction).
(b) Sense of Congress.--It is the sense of Congress that passage of
legislation to fix the underlying problems with our tax laws is
essential and should occur as soon as possible, so United States
corporations will not face the current pressures to engage in inversion
transactions.
Union Calendar No. 41
108th CONGRESS
1st Session
H. R. 1531
[Report No. 108-67]
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to enhance energy
conservation and to provide for reliability and diversity in the energy
supply for the American people, and for other purposes.
_______________________________________________________________________
April 9, 2003
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed